From the Tor site:
Tor is a software project that helps you defend against traffic analysis, a form of network surveillance that threatens personal freedom and privacy, confidential business activities and relationships, and state security. Tor protects you by encrypting your communications and bouncing them around a distributed network of relays run by volunteers all around the world. Tor works with many of your existing applications, including web browsers, instant messaging clients, remote login, and other applications based on the Internet's TCP protocol.
Hundreds of thousands of people around the world use Tor for a wide variety of reasons: journalists and bloggers, human rights workers, law enforcement officers, soldiers, corporations, citizens of repressive regimes, and just ordinary citizens. See the overview page for a more detailed explanation of what Tor does, why this diversity of users is important, and how Tor works.