Basically, it provides a full virtualisation layer using Intel VT and AMD-V extensions to do the majority of the work. 

It is now part of the mainline Linux kernel, and  is supported by RedHat and other key players.
It offers much that XEN does (if you have heard of it) without the complications, obfuscated scripting and painful configuration.

Detail :

• KVM provides close to bare metal speeds
• It has paravirtualised nic and disk drivers - this basically means that IO does not need to go through the whole virtualisation layer - in a nutshell, bare metal IO
• It also leverages Linux - virtual machines are easily managed just like a normal running application, Linux Volume Manager allows for host based snapshots, openGL support for video...
• All of the migration tools work

The KVM wiki http://kvm.qumranet.com/kvmwiki
Lots of information about what does and does not work. 

Promox VE http://www.qumranet.com/ - Linux distribution targeted at KVM.  Think of it like ESX.

Solid ICE  http://www.qumranet.com/products-and-solutions - openGL accelerated KVM virtual desktop environment