You can read more about it here: http://www.nanowrimo.org/index.php?
You can use most word programs to keep track of your wordcount but the goal is 50,000 words by the end of one month. You can either write 1,666 words (approximately) each day or you can stagger it out.
The Critique Circle newsletter had a good summary so I'm going to quote it from my inbox, since I can't find a copy online:
How many of you are planning on giving your game a kickstart this month? Let's all work together! \(^∀^)メ(^∀^)ノEvery year thousands of writers around the globe participate in NaNoWriMo.National Novel Writing Month. Some writers call it What Was I Thinking Month, or I've Gone Off the Deep End Month. And why is this? Because anyone signing up for Nanowrimo has one goal in mind-to complete a 50,000 word novel between the 1st and 30th of November.
The spirit of Nanowrimo is to lose the excuses, lock up the internal editor and get the butt-in-the-chair to write. Your book doesn't have to be an opus, but it does have to contain 50,000 words of brand new content.
Some people use this month to try a new genre, a new POV, or as a way to exercise their descriptive talents. Nanowrimo can be for serious writing production or just for fun-it's all up to you. :) Here's a great list of some of the past Nano novels that went on to publication!
There is no cost to join and no prizes, just bragging rights that you were crazy enough to enter and props if you succeed. Many CCers here join each year to take advantage of the no editing necessary train of thought and just WRITE.