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Assuming you have internet connectivity configured, it lets you exchange Mii's and send "email" messages. Your Mii's which are set to mingle will show up in the Mii parade on other people's systems, and they can choose to add them to their Mii collection from their. Mii's can also be sent directly to someone's system, which is where things can get annoying.
I'm assuming that some games will take advantage of this connectivity as well, but I don't know of any that do right now.