Well, it's a physics engine with the same principles as the 3dgs physics engine, but its free, works with multiple versions of 3dgs, and does not have any limitation to the number of physics objects.
What can you do with it? Many, many things - once you start thinking about how real world objects interact. For an example, they now have a simulation on the Newton page of a pool (billiards) game. No code was needed to describe to the billiard balls how they react if struck from certain directions with a certain force, etc... The balls were setup with a mass and other physical properties that describe them. The billiard balls are physic objects that know how to react when a force (another ball striking them) is applied. The physics engine does all the work of calculating what direction the ball moves, how it rolls, how far it is propelled, etc. I think it makes it much easier for the developer - hence the reason everyone wants to use a physics engine.
Regards, Ron