PhysX was a physics-based API developed by Ageia that enhanced the movement of objects within a gameworld by taking the strain from the CPU and handling calculations on a dedicated card. The problem was that you needed a PhysX card sitting in your computer to get the most benefit and unlike 3D acceleration cards, this never really caught on with consumers.
PhysX got a shot in the arm when the parent company was purchased by NVIDIA and ultimately integrated onto a new range of video cards. Any recent video-card starting from the 8800 GTX and above now supports PhysX, offering gamers increasingly realistic motion effects. Now the problem is, game developers need to support the PhysX API or it's just going to sit there like a brick.
A recent licensing agreement between Electronic Arts and NVIDIA means we'll be seeing a lot more of PhysX in the future, starting with Mirror's Edge which is currently slated for a January 2009 release.