Notifications are a way for your applications to provide you with new information, without you having to switch from the application you're already in.
Here are just a few examples:
Safari has finished downloading a file (GrowlSafari)
You've received new email (GrowlMail or Thunderbird)
You've received an instant message (Adium, or iChat with Chax)
iTunes has started playing a song (GrowlTunes)
Your laptop battery is low, or has finished charging (HardwareGrowler)
Growl handles the job of displaying these notifications, so that applications don't have to all do it themselves. Above is an example of Growl's Candybars display. We have screenshots of all Growl's various displays, including our own version of Bezel.
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