Essentially it's like a local guide, but with added interactivity and - um - fun. You join, then register your favourite places. Each time you visit one of those places you check in with your mobile, to say that you've been there. The person who checks in most often becomes the 'Mayor' of that place. So it's easy to become the Mayor of your own house, but harder to become the Mayor of a cool bar. It's easy, assuming you have a modern phone, and the fun, competitive element keeps people interested. It has potential to become very popular; just wait until lots of journalists start obsessing about it and suddenly it'll be all over the newspapers like twitter and iPhones.
My excuse for writing about it is that I've just seen the first piece of marketing to make use of it. (First spotted by me, that is. It's been going on in the US for a while now, as detailed by this article in the New York Times.)
Dose Espresso, a coffee bar near the Barbican in London, is giving away a free coffee tomorrow to anyone on Foursquare who checks in. & also free coffee for a week to the current Mayor.
(The offer to the Mayor came first, quickly followed by the wider offer)
I really like this (twitter seems to be spreading the word nicely for them), and I suspect that we'll soon be seeing lots more of it. Think about it (especially with the Mayor thing); if someone will go the the trouble to report that they like your business and try to be the most frequent customer, wouldn't you want to reward them?
The NYT article details a few other ways in which companies could integrate themselves into the game, including sponsored badges, and promotions across chains.
Update - here is another example, from the US
& here's one way to sign up your venue for Foursquare special offers
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