What is it? Atom is a processor. It consumes between 0.6 and 2.5 watts running full out depending on the clock speed, and as little as .03 watts in sleep mode. It is tiny- 25 square millimeters or roughly 3 millimeters by 9. It's x86 compatible, as it's derived from Intel's Core architechture. Clock speeds for it are currently estimated at 1.8GHz at the top end, 500MHz at the bottom. The technology is capable of either hyperthreading or dual core.
What's the big deal? This is huge. Look at the requirements for Windows XP. 300MHz Pentium class processor with 128MB of RAM. This thing easily clears even the recommended requirements at the minimum 0.6 watts power level. With an Intel Solid State hard drive and 1GB of RAM this thing is a whole PC that fits inside a tin of Altoids and runs on AA batteries or can be embedded inside a 22" monitor for about the cost of the cardboard box it comes in. In silicon small = inexpensive and this is tiny. This moves a real PC into the realm of affordability for a huge segment of the world's population that was previously not served.
Mini-ITX is a popular platform, and VIA gets up to $300 for their 1.5GHz platforms in this form factor. "This complete platform is expected to be priced at no more than $50-60 in retail." Wow. Just wow. The implications for car PC and embedded media player applications is enormous.
What else? There's a Centrino Atom chipset aimed at the Eee, OLPC and Classmate class of cheap notebooks with wireless, fair video, and all the usual goodies that stays at low power. Over 50 subnotebooks that Intel is now classing as "Mobile Internet Devices" or MIDs are launching right away. Phone applications are obvious. Perhaps less obvious are the implications for home routers, thin clients, toys, home robotics, gumstix, Network Attached Storage, Wireless mesh networks, military applications, POE webcams, supercomputer applications and workstations.
The downside: Although some vendors will claim the "Vista Capable" label, we all know what that means. It means that the PC is incapable of giving a good experience when loaded with Vista. A version of Ubuntu is available for it already, though, that runs Open Office just fine so you should be able to open those PowerPoint presentations in Impress without any trouble on your Mobile Internet Device.
The interesting question really is "what would you do with it?" Really. Pretend for a moment you're a platform engineer and tell me what you would do with this thing.