From the Photosynth demo description:
Using photos of oft-snapped subjects (like Notre Dame) scraped from around the Web, Photosynth creates breathtaking multidimensional spaces with zoom and navigation features that outstrip all expectation. Curious about that speck in corner? Dive into a freefall and watch as the speck becomes a gargoyle. With an unpleasant grimace. And an ant-sized chip in its lower left molar.
Basically this thing takes images and creates composites depending on the content of the image. So if one person takes a picture of a car and another person takes a picture of the tire, Photosynth will combine the images so you can zoom in on the tire. Take this concept and repeat it 1000 fold, and you basically end up with a 3D space created entirely from photographs.