How does it work?
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It works well, they click the e-mail link, and it saves a cookie to log them in. I think it's a decent solution. It comes down to preference, would you rather type in a password, or click a link e-mailed to you. At times, I have complex passwords, so they take a while to type, and other times, I'd rather type in a password, than access my e-mail on a computer or network of questionable security.
In the end, passwords need to change, and I think in the future they'll disappear. We need smart cards or something along those lines. Click the login button, pass the card over your phone or computer, and you're instantly logged in. The card remains in your wallet like any other.
A number of people have said it provides weaker security, but I disagree. You can guess passwords, you can record or watch someone type a password, or catch the password over insecure protocols. The e-mail approach doesn't have these holes. The link is valid once, so if you login and someone else tries to use the same URL after snooping, it's not possible. With password logins, people can use the password for that site, or your e-mail password to reset the login. With the e-mail method, they need your e-mail password, that's the only way they'll be able to login to your account.
However, you do need secure access to your e-mail. I know there are times when I'm on a public or friends computer, and I need to quickly login to a service. I'd much rather enter my password only used on that service, instead of entering my e-mail password. This way, if it becomes compromised, it would be a much smaller concern.