For those who haven't seen this video of Watson whooping folks at Jeopardy, it's incredible.
This promotional video from IBM is quite interesting (and not too overbearing with marketing snazz).
The early Watson tests at 1:40 are particularly interesting.
I'm not an AI person by trade, but I have read rudimentary text on the difficulty of natural language processing. Watson seems to handle this absolutely amazingly, along with its incredible data mining. The problem space Watson handles is a tad dwindled, in that they can tune Watson for Jeopardy style language, but it's still very impressive.
Then there's the question of what IBM can do with this technology. IBM will certainly try and create Q&A systems to see to companies, such as medical institutions where doctor's can use a Watson to help determine medical illnesses better.
However, there is another sector that some feel IBM could enter and be far more profitable, building a search engine (err "answer engine") to take on Google. Affectively do what wolframalpha.com has attempted to do. Once in awhile I go to wolframalpha and try it out, but end up being disappointed. If IBM could build an "answer engine" of high quality, they could steal a nice chunk of search traffic away from Google, Bing, etc. I don't know what percentage of search queries are really Q&A queries, but I can't imagine it being tiny.