It offers a pre-made board (the trade-off is price) that isolates the GPIO pins and protects the Raspberry Pi from damage. It also provides additional/enhanced capabilities to the basic in/out offered by the Raspberry Pi's GPIO (it includes two relays to control larger power drawing devices, and allows you to connect a variety of sensors to allow the Raspberry Pi to sense and react to its environment - light, ultrasonic, water, etc).
What you do with these extra capabilities is really up to you. The Raspberry Pi and its developing ecosystem are fairly new, but the philosophy is similar to that of the Arduino or even Legos give the user the basic building blocks and then let their imagination and ability guide them.
Some examples of what you can do with the extra capabilities provided by the Pi-Face include:
- build robots
- home automation/security
- auto pet feeder
- laundry sorter for the blind/color blind
As I said, the possibilities are really only limited by your abilities and imagination.