A few misconceptions continue to circulate here; let me try to shed some light.
First, the encryption system is apparently not practical in its current form. Maybe improvements will occur some day to make it practical, maybe not. It is still a major theoretical breakthrough because fully homomorphic encryption had often been thought to be impossible in the past. It has been a long sought goal in cryptography and it is remarkable to see it finally achieved. So in practice nobody is going to be doing spam filtering, income tax returns, or anonymous google searches any time soon.
Second, several people have gotten tripped up over an apparent weakness: if you can calculate E(X-Y) you can get an encryption of 0; if you can calculate E(X/Y) you can get an encryption of 1; and from these you could get other encryptions and potentially break the system. This idea fails for two reasons: first, it is a public-key system, so you don't need to go through all this rigamarole to get encryptions of 0, 1, or anything. In public key cryptography, anyone can encrypt data under a given key, without knowing any secrets. So it is already possible to get encryptions of known values, even without the special homomorphic properties. Second, in order for public key systems to be secure, they need to have a randomization property. In randomized encryption, there are multiple ciphertext values that encrypt the same plaintext. Basically, the encryption algorithm takes both the plaintext and a random value, and produces the ciphertext. Each different possible random value causes the same plaintext to go to a different ciphertext. The decryption algorithm nevertheless can take any of these different ciphertext values and produce the same plaintext.
This may be confusing because the most well known public key encryption system, RSA is not randomized. At the time it was invented, this aspect was not well understood. Shortly afterwards it became clear how important randomization is. Other encryption systems like ElGamal do use randomization, and RSA was adapted to allow randomization via what is called a "random padding" layer, known by the technical name PKCS-1. This adds the randomness which allows RSA to be used securely.
One other point is that people are getting hung up about what "fully" homomorphic encryption covers. Exactly what operations can you do? I think the best way to think of it is to go down to the binary level. We know that in our computers, at the lowest level everything is 1's and 0's. These get combined with elementary logical operations like AND, OR, NOT, XOR, and so on. Using these primitive operations, all the complexity of modern programs can be built up.
In the case of the homomorphic encryption, it is probably best to think of the values being encrypted in binary form, as encryptions of 1's and 0's. Keep in mind the point above about randomized encryption: all the encryptions of 1 look different, as do all the encryptions of 0. You can't tell whether a given value encrypts a 1 or a 0. Given these encrypted values, you can compute AND, OR, XOR, NOT and so on with these values, and get new encrypted values as the answers. You don't know the value of the outputs, they are encrypted. Only the holder of the private key, who originally encrypted the data, could decrypt the output. But you can continue to work with these output values, do more calculations with them, and so on.
Let me give an example of how you could do an equality comparison. Suppose you have two encrypted values and want to determine if they are the same. Recall that we are working in binary, so you actually have two sequences of encrypted bits; some are encrypted 1's and some are encrypted 0's, but you can't tell which. So the first thing you compute is the XOR of corresponding bits in the two values: XOR the 1st bits of each value; XOR the 2nd bits of each value, and so on. Now if the values are equal, the results are all encryptions of 0's. If the values are different, some of the results will be encryptions of 1's. But again, you can't tell them apart. So now you compute the OR of all of these result bits. If all the result bits are 0's, the output will be an encryption of 0; if any of the result bits were 1's, the output will be an encryption of 1. So this output bit tells whether the original values were the same: if it is an encryption of 0, they were the same; if an encryption of 1, they were not. Once again, you can't tell which it is, but it holds the answer to your equality question.
The point is that you work with encrypted bits, you can perform any calculations you like on them, creating the equivalent of a logic circuit; and all the way through and at the end, all of the intermediate and final results are encrypted bits too. You don't learn anything about any of the values you are working with; a 1 looks the same as a 0 to you. But you can compute any circuit you want. In the end you can send the output back to the person who owns the private key, and only they can decrypt the data and learn the final result.