InPrivate Browsing helps prevent Internet Explorer from storing data about your browsing session. This includes cookies, temporary Internet files, history, and other data. Toolbars and extensions are disabled by default.
At first I thought that roughly translated to, browsing the Internet without leaving behind things that you didn't want your spouse, boss, children, or whoever to see and thought it would be a useless feature.
It turns out that it is a wonderful tool for testing web sites. A recent project at work involved testing load balancing as well as numerous changes to the html and css code. With IE7, that meant deleting your cookies and temporary Internet files often to be sure that nothing was being read from your local computer. With IE8 InPrivate browsing, that wasn't a problem, simply closing it and opening another InPrivate session was all you needed to do.