Widgets are small apps created by both company and third-party developers that allow users to have easy access to info (local weather, traffic, lottery numbers), services (RSS aggregator, raise/lower speaker volume, calculator, etc.), games, and more (monitor eBay feedback ratings). Plenty of "search" widgets, too.
You can browse and download all widgets here.
From the AP:
The widgets will draw upon information and services already on Yahoo's Web site without requiring a browser to see it. The material instead is displayed through an animated icon on the computer desktop. To help popularize the widgets, Yahoo will give away the Konfabulator software that empowers the applications. Konfabulator had been charging $20 for the software.
I just downloaded the Konfabulator app (8.8 MB for Windows) and selected a few widgets. I was up and running in a matter of minutes. Konfabulator sits in the Windows system tray for quick access.
With all of the licensed content Yahoo offers, widgets could be one way for users to access some of it.
Widgets could also give Yahoo a new spot to offer paid advertising. For example, a widget with sports scores could also offer an ad to buy tickets or merchandise for a local team.
The biggest challenge Yahoo faces is getting web users (non-tech geek types) to know about and understand what what Konfabulator provides and then to take the next step to download, run the app, and select widgets. Bottom line? Not easy.
Postscript: More info available on the Yahoo Widgets page.