Currently live in 21 cities (including Denver, naturally), it works like this. Sign up, tell it what fabulous thing you are doing ("@Sputnik, drinking my weight in PBR" for example), and bingo, you're playing. It works with iPhones, mobile browsers and even with good ol' SMS for poor tech nerds like me who can't afford a fancy-pants smartphone. Once you tell it where you are, it tells your friends, so they can join you (or mock you for hanging out in loserville), and the social-media circle of life is complete.
Each time you the game where you are and what you're doing, you get a point -- and points earn badges (like awards for traveling to multiple bars in a night). Earn enough points and you could become mayor of a location, which is awesome -- I've always wanted to be mayor of a dive bar.
It may sound silly, but anyone who's ever been sucked in by the siren's call of earning Xbox 360 achievements, or chased the milestones in a traditional MMO knows how damnably addictive they can be. Couple this with the fact you're winning by doing things that are theoretically fun anyway -- going to clubs and shows, drinking your weight in shitty beer -- and you have an irresistible combination.
According to social-media news site Mashable, Foursquare is growing like Twitter once did (i.e. explosively) and has already tapped into a lucrative advertising niche. That's great for them, but even better is the idea that it may translate into various specials, freebies and discounts for achieving certain milestones -- the equivalent of frequent flier miles for a clubbing habit. Your liver may never recover.
I've just gotten started myself. Add me as a friend and see how much of a loser I really am!