In a nutshell, Wolfram and his team have built what he calls a "computational knowledge engine" for the Web. OK, so what does that really mean? Basically it means that you can ask it factual questions and it computes answers for you.
It doesn't simply return documents that (might) contain the answers, like Google does, and it isn't just a giant database of knowledge, like the Wikipedia. It doesn't simply parse natural language and then use that to retrieve documents, like Powerset, for example.
Instead, Wolfram Alpha actually computes the answers to a wide range of questions -- like questions that have factual answers such as "What country is Timbuktu in?" or "How many protons are in a hydrogen atom?" or "What is the average rainfall in Seattle this month?," "What is the 300th digit of Pi?," "where is the ISS?" or "When was GOOG worth more than $300?"
Think about that for a minute. It computes the answers. Wolfram Alpha doesn't simply contain huge amounts of manually entered pairs of questions and answers, nor does it search for answers in a database of facts. Instead, it understands and then computes answers to certain kinds of questions." via Nova Spivack