Basically, it hides your IP address and tricks the webpage you are on to think you are from that country. I use such a website, and from Ireland I can use the bbc iPlayer, the american networks catch-up websites, Netflix US etc. Anywhere where I get the message "sorry, not available in your country" I can bypass it by turning on the software you download an pay €3 for a month.
Intresting may look into this, the netflix working good for me at the moment but the UK content isn't that impressive, I hear in the US there is a much better selection.