Previous answers describe what sharepoint is, but don't do a good job describing why it's popular. Yes, it gives you all that neat doc-management stuff out of the box. Yes, it integrates tightly with Office.
The OOB features are 1/10th of the whole story. Sharepoint exposes a comprehensive .Net object model that lets you customize the thing to your hearts content. People are coding amazing things with MOSS 2007. With the object model, you can build and customize sites via code, in response to external events. You can write custom "web-parts" (controls hosted on special pages) that consume both internal (sharepoint) and external data.
Check out Sharepoint Blogs to see what people are doing with it.
