Why do you care?
Well, FUSE lets you mount new filesystems at the user level (not the root level). These are actually virtual filesystems, as the FUSE code permits you to rather abstract what it means to be a filesystem, and thus use, say, your Gmail account as a filesystem. (So you can have multiple Gmail accounts, each granting you 3 gigs of online storage for free.)
Other cool tricks include simply supporting unsupported filesystems (crytoFS), improving support of already supported filesystems ( add read/write to NTFS, improving WebDAV performance) or even supporting different sorts of remote servers (such as FTP or SSH) as filesystems (permitting you to securely access your home computer as a “disk” using nothing more than the included SSH server).
Currently, there are some issues, but anecdotal evidence shows that it works pretty well (but for some funny implementation issues vis a vis the Finder). FUSE filesystem modules need to be compiled by hand right now, but many are tested, and some (GmailFS) are very likely to get tested/approved pretty soon.
This is yet another example of why the super-awesome BSD underpants of MacOS X make it as geektacular as Linux but as easy to use as, well, the Mac.