It's a BUS. Similar to the USB. (Universal Serial Bus)
In theory you can have a bunch of sensors daisy chained to each other on only on two wires, and still be able to receive and transmit data from each individual sensor. Other than that i don't know much about it. But, you can do some neat things with the I2C bus. For a neat way to use the I2C bus with an array of RGB Leds watch the youtube link.
http://en.wikipedia.org/wiki/I2C
http://www.harbaum.org/till/i2c_tiny_usb/index.shtml
http://www.sparkfun.com/commerce/pro...oducts_id=8579
http://www.arduino.cc/playground/Learning/I2C
http://www.youtube.com/watch?v=dUf9SzWqKOo