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DesktopLyrics is an application that displays the lyrics of the song currently playing in "iTunes" right on your desktop. The lyrics for the song have to be set in iTunes, DesktopLyrics does nothing to fetch them if they aren't available in iTunes. If you don't want to type-in all your lyrics manually you can use an application like "Harmonic", "GimmieSomeTune" or "Get Lyrical" .
Note: As of version 2.0.0, DesktopLyrics is no longer free and costs $3.99. A 'Lite', unsupported version of the app is available here.