One of my co-workers sent me an e-mail about this project and I think it is a really interesting experiment showing how the general public interacts with image collections in what they perceive as a non-library environment. To start you may want to visit the collection and browse around.
The LOC has also posted a good FAQ list that covers a lot of what I wanted to know when I heard about the project.
It is pretty amazing to read the extensive comments, explore the tagging going on (lots of international users!) and see how users are enthusiastically interacting with the collections.
What do you think? Should we do this with some of our institution's lesser-described and popular collections? Are any of your digital collections in Flickr?