It's the same service as Grand Central, which I've been using for 2-3 years now.
The basic idea is that you can hide all of your various phone numbers behind your Google Voice number. People call it and all of your phones (or the ones you have configured for that caller or at that time of day) will ring. Whichever one you pick up gets the call, and you will be told the person's name and given the choice to actually answer or bounce them to voicemail.
On the other side, you can use the web interface to have Google Voice call one of your phones and connect you with any phone number you give it. This is free, except for international calls. I don't use this too often, but it helps when you don't want people to find out one of your 'real' phone numbers.
The best part is that you can control incoming calls essentially with a spam filter. When people call you they have to state their name (the first time), which plays when you answer their calls. You can decide to bounce certain numbers straight to voicemail every time or give them a 'this number is not in service' message.
Google Voice added the following features that I like:
- Voicemails are transcribed, not very well but you can usually get the jist quickly without listening
- SMS is now forwarded as well, which was pretty much the major short-coming of Grand Central.
Overall, I really like it, and the service quality has been quite good. The main thing is that it is not a phone service in itself, but something you use with other phone services.