If you're familiar with the grid computing projects SETI and Home and Folding at Home, you'll grok this in an instant: Faroo takes the idea of a centralized search engine like Google and spreads it out to the users. With this service installed, your computer becomes a micronode on the Faroo search network.
The benefit to the search company, Faroo, is obvious: They don't need to build a billion-dollar infrastructure. The benefit to the user, though, is Faroo's key differentiator: The company will shunt a proportion of advertising revenues to users, based on what their computers are indexing.
The challenges to getting this to work, though, are legion: How do you get enough users online to build an index good enough for users to actually want to use it? What about index farms that try to game or hack the system? How do you get users to run yet another resident process on their PC? (For me, a payout of a few cents a month isn't worth dragging down Windows.)
Also, if ISPs continue their efforts to limit bandwidth to consumers, Faroo's prospects could be limited as well.
Still, though: Cool, don't you think?