Updated 11/17/99
Basically, it is an on-line payment system based on real, physical gold, rather than some banks' opinion of what an asset is.
This is a quick summary, meant to give you enough of an idea to want to go read more, any differences between what I say here and what e-gold says mean that I am not reading their site closely enough. This page is subject to updating if I find I have my facts wrong.
e-gold is an on-line accounting of real gold, held in various vaults. When you send money into the e-gold system, you are actually buying a quantity of gold, which is tracked to a considerable level of precision. This gold is stored on your behalf by e-gold through contracts with various organizations, see the site for details. There are service fees for all of this, the details are on the site.
You can actually have your gold sent to you, within limits, but it ceases to be useable for on-line transactions. You can also redeem gold for currency, by requesting a check, which can be sent where you wish, payable to whom you specify. (This can be very handy.)
In the normal course of things, you would use e-gold to settle on-line financial transfers. For this to work, both parties must have e-gold accounts, and you would just order a transfer to the account of whomever you wanted to pay. Others can send payments to you. This allows for nearly instant payments.
Internally on the system, all metal (more than just gold) is accounted for by weight, with dollar (or other) values used as a convenience for customers..
This is not a bank. What it is, is very handy in some situations. I will update this page at some point, after I have worked with the system.
In the mean time, you are encouraged to visit e-gold and read about it for yourself.
If you have more money than you know what to do with, you can always drop some of it on account 109262. :-)