Yahoo Widgets is an application platform by Yahoo for the OSX and Windows platforms. The app is free, and uses Java and XML to run other small applications.
Default widgets include weather, a clock, a calender and so on. More advanced widgets include simple RSS feed readers, webcam viewers, world clocks, and more. Each widget is effectively it's own program, though so too many widgets running at once could have an adverse effect on the performance of the system.
Because Yahoo Widgets is based on Java, it is relatively easy for developers to create new widgets. As such there are thousands of widgets available far beyond what was developed by Yahoo themselves.
Initially developed as Konfabulator for Mac, Yahoo bought the eponymous company in 2005 and released it for free as Yahoo Widgets. The underlying platform is still named Konfabulator.
Yahoo Widgets is similar to OS X's Dashboard, and Vista's Sidebar Gadgets.
Some Internet connected Blu-ray players and TVs have their own version of Yahoo Widgets that offers similar functionality.
For more background on Yahoo Widgets, visit the Wikipedia page.