Folding@Home is a program that performs multiple quantum calculations on protein folding properties. Specific proteins of interest are chosen and calculations are performed on them using a specific base set and model, but I forget what the hell organic chem people usually use to make their calculations so whatever.
In short, the program does fancy calculations with any unused CPU your computer might have. So, when you run the program, that 99% you see for System Idle Process should go down a fair bit, and that percentage will be used to make a few complicated calculations.
Why they're asking people to lend their computer power to perform some calculations is simply because any little help they can get can go a long way, especially since a few of these calculations on a single protein of a single configuration can easily take whole months. So they decided to try and get help from people who leave their computers on and idle all day by making a little competition. Also knowing that your computer is working for the benefit of humankind while you surf the web or do other simple tasks is pretty awesome.
Also I might add that the program always uses any unused CPU, so if you decide to play games that require allot of power (Crysis, Team Fortress, etc.), the program will not "suck" the performance out of the game. The program runs on the lowest priority list, so whenever you use the computer the program will simply slow down to compensate, or even halt when you're doing something big.
