Digg is a news site where the news items (stories) are submitted and reviewed by users. Not an editor but the users decide which stories go to the frontpage. "Power to the people!" so to say 
Well the people from the digg community that is. Every "story" is submitted and voted on by the digg community.
User who find an item they like or "digg" submit the story by providing the webaddress (URL) a short title and a description. The story is stored in a holding bin until enough other users vote in its favor. Once that point is reached the story moves to the frontpage or a subsection.
Are people using it? Well here are some numbers; about 800k unique daily visitors, resulting in 9 million plus page views a day and growing.
Digg is "socialWare", its from people for people. You can choose to participate and "digg" some stories or just browse through it. One thing is for sure you stumble upon links to unique stories not easily found in another way.