This name has been around for a while, and it won’t hit retail until the second half of ’09, but its impact in the long run could be very significant.
In some sense Larrabee is a graphics processor, like those developed by nVidia and AMD/ATI, but it is put together very differently. It will be a many-core processor; like a Duo or Quad CPU but with more cores. The cores will be smaller and less powerful than CPU cores (they are actually heavily redesigned Pentiums) but will be similar in other ways.
Larrabee cores runs an extended version of the same x86 instruction set used by your CPU (be it a PC or post-2006 Mac). The extension allows the developers to use the chips more effectively for graphics, but the x86 base means they can also do things in a similar way to a CPU. For instance, a portable video player is all about graphics, needing just enough normal processing to let you deal with menus and such. Devices like this may be better off with a Larrabee style processor than an Atom.
Because Larrabee is based around a variable number of cores, it is incredibly scalable. The aforementioned portable video player and entry level graphics cards might use 4 or 8, with high-end graphics cards using 12 or 16, and even triple digit numbers of cores for specialized enterprise configurations.
Most likely to the chagrin of nVidia and ATI, the first thing Intel plans to use Larrabee for is a discrete graphics card.