In a nutshell, it's a multi-zone capable audio system.
You can distribute the content either via Ethernet or proprietary mesh wireless network.
There are 4 pieces to the system. Depending on your setup, you'll need one or all of the following:
Zone Player with amplifier (plug speakers directly into the player)
Zone Player without amplifier (plug into existing amplifier)
Zone Bridge (fills in gaps in coverage, does not play music)
Sonos controller
To start your system, you plug a Zone Player or Zone Bridge into your router. You use the controller (or an iPod Touch/iPhone) to run it.
The system is capable of playing streamed music from a number of sources like Sirius, Rhapsody, Napster, Last.fm, Pandora, etc. You can also stream hundreds of radio stations and web-only products.
You can also index and play all of your digitized content on demand.
The system can link zones for simultaneous listening, or you can play different things in different zones. Each zone also has a line-in jack so that you can plug an iPod, cable/satellite receiver in.
It's an awesome system. I have 6 zones in my house and love it. It's also very user friendly. Their support is top notch if you run into any problems.