I'm obsessed with this site!
Basically everyday a business in a participating city puts up a really great deal to their establishment and if enough people buy the deal then the deal becomes activated.
I have yet to purchase a groupon but it doesn't matter because I have so much fun just looking at them online.
I even look up what groupons are up in other cities!
Cities I have never been to nor will ever visit yet I love looking up what groupons are available there.