Digg is a place for people to share information from anywhere on the web. These news items can be from a traditional news source like CNN or from an individuals blog. The Digg stores can then be voted on by the users and this determines the news content that you will find on the web site. The more readers that digg the site the faster it will rise to the top of the news list. And of course the readers can comment on the stores or add information about the story thus creating a very social web site.
Digg started out as a site focused on Technology and has since changed to include a great deal of general news items.
I find Digg to be a useful site if you are really into the latest news and want a source outside of the local paper or network news. It is also a great place to look for information new a breaking news.