How it works is simple. It holds boarding passes, movie tickets, retail coupons, loyalty cards and items like that so you can use it to get into train stations, cinemas, clubs, airports and more. According to Apple it even tells you if you are in the wrong terminal to catch your flight.
Windows Phone has a similar app which is coming on Windows Phone 8 (who came up with the idea first is unknown). The Windows Phone app has similar things (like coupons and vouchers) however it also holds debit and credit cards so you can just scan your phone's NFC chip in a shop to make a payment. It is unknown if Apple will have an NFC chip on the iPhone 5 but it is highly lightly.
The iPhone 5 is being announced tomorrow so keep tuned to my blog to find out more. Also, will all the rumours saying the iPhone 5 will have a 4-inch screen I genuinely hope Apple give it a 3-inch screen just to annoy everyone who has been making rumours.