WordPress Multi-User (WPMU) allows multiple blogs to run off a single install of the software. Hence WPMU differs from what we might call WordPress Classic, under which each blog needs its own install of the software.
WordPress.com is a WPMU site. It is by far the biggest such site, currently hosting over half a million blogs. January 2007 saw the addition of 89,000 of these blogs, as well as 126 million pageviews.
You can see a list of other WPMU sites in the sidebar of How Do You MU? HDYM is another of my blogs, and is itself a WPMU blog. It is hosted at edublogs.org.
James Farmer, Mr Edublogs, has just announced a premium service for educational customers who want their own hosted WPMU site. I can recommend James, and hence Edublogs Premium, most highly.