Face recognition looks for the shape of a human face within a scene. The main benefit is for autofocus, since the camera will automatically focus on faces without you having to either center the subject, change focus points or focus and recompose.
Some of the more advanced cameras incorporate smile detection, recognition of specific people, and other variations on the theme. Now as with many of the features being crammed into cameras now, the big question is "Is it useful?"... I'd say yes, when it is well implemented. When it isn't, it's just another gimmick shoved in there to help make the product stand out in a stupidly crowded market.
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