Didn't you people ever play with these things in school? It is basically a very simple circuit board whose controls are run through another computer. It allows certain pieces to move (such as small motors), or things to activate (such as lights). It's for building moving Lego models. It really has less computing power than an abacus, and I'm sure a Telematics Pong system would give it a run for it's money, but it's good fun.
Michael: Jodie, how's my schedule look for today? Jodie: You've got a conference and dinner party at the Japanese Embassy regarding wildlife protection. Michael: Oh, yeah...sorry, but I'll have to cancel that. I'm heading out to save America!
It's a simple computer. You can run programs on it and write programs for it. LEGO ships it with a pointy-and-clicky peace of... well, baby programming software which DOES give it less power than an abacus, but with legOS you can write C programs for it - and have 32K of memory. all you'll ever need. anyway:
the display is of the same type digital watches have, can be used for displaying numbers for debugging etc, networking is possible via infrared - this is the way it communicates with a PC (to get the programs) or other RCX.
There are 3 inputs for sensors. to get information about the outside world and 3 motor outputs to run motors and lights,
basically, it's a fun "intelligent" brick that you stick into robots and program it. "Programming" can either be a point-and-click "do this" "do that" or proper programming in Java or C - which would allow things like a robot that drives around and saves where obstacles are - and sends the data to a PC which can display a map. or whatever.
edit: what TecniFreak (ah whatever, Tornado anyway ) describes is something different. This thing is autonomous. What he described ain't. it's stationary and has no computing power at all. it's simply an interface between a computer and LEGO.