The system includes a pump that you install adjacent to the water heater, and a temperature actuated bypass valve that connects the cold and hot water supply lines at the fixture that is farthest away from the water heater. According to the manufacturer's website, this combination creates a pressure differential that allows the cold and cool water in the hot water supply line to "bypass" (at a low volume) into the cold water supply line through the thermostatically controlled sensor valve, keeping the water in the hot water supply line at a "no-wait" temperature throughout the home. The timer on the pump makes it more efficient during downtime.
It's going to take a few months to determine how much this system will save us each year, but most estimates I have come across are in the neighborhood of 11,000-15,000 gallons of water saved per year. Obviously, this is offset somewhat by the additional expense of running the pump, but this can easily be minimized by setting the timer on the pump for peak use.
There are other ways to accomplish the same results, depending on your needs and budget. If you are interested in installing such a system in your home, be sure to bring this up with your builder early in the process to avoid change fees. Better yet, hire me to represent you throughout the purchasing process, and I'll be happy to inform you of other energy-saving features you can ask for.
Next project... a whole house water filtration system!