The Padfone is unlike anything we have seen yet from other manufacturers. However, I do not find this design and concept hugely useful. It is simply not something I really want to have.
In a nutshell, the Padfone is a pair consisting of an Android phone and a tablet. The phone fits into the back of the tablet housing and can charge from the tablet's battery. The tablet also has a slightly tweaked UI which makes everything work on a bigger screen. The phone's 3G data connection can be used for web browsing on the tablet too.
The introductory video from ASUS lets you take a very good glimpse at how this thing works.
Press release at BGR.