It took me a long time to come around to Growl, but now that I have, I love it. In order to see what it can do, though, you have to go to the Growl site and see which applications you have that are compatible with it.
Basically, it provides a consistent visual interface for system notifications, from when a buddy comes online, to when you have new email, to when your bittorrent is finished downloading, to when there's a new article in your RSS reader. These notifications can either be "sticky," meaning they stay on your screen until you click on them, or non-sticky, where they show and then fade away.