Like I said I have not actually used MU I have it downloaded and am in the process of setting up some local shit to get a feel for her, but yes you can set up multiple blogs on one site basically using one install using directories or sub domains, which is tits, because say you have a site that covers a wide variety of sub niches like a sports site, you can seamlessly set up a series of blogs, or areas to your site and just make it look like one complete site, so covering in depth the NBA, MLB, NFL, NHL, tennis, motocross......... blah blah blah that you could not possible cover properly using just one install of WP properly you can set up an additional blog with each, without having to set up, install, theme, log in to, post to and the list goes on for each...
From what Ive read the other night this is the shit, the shit I have been loking for, but have been going about the wrong way, there are so many different applications that you could use WP MU for that the list is actually endless.
Think about it, set up a complete network of 100,000 Arbi sites with one install of WP, start a blog hosting site, create your own little network of content sites or blogs I mean the list goes on, If I am wrong or have the wrong impression of this script please stop me, because I actually lost sleep over this last night, and I am sure I will be up all night tonight, jotting down notes and coming up with ideas..
Heres a good example of WP MU in action,
Blogs - New York Times