What does this app do? Is it some type of IM service?
Yes. It is a client for Google Talk, an IM service provided by Google. It is available as a desktop app and through a non-mobile web browser in gmail, and the protocol is supported by many IM clients on the computer (such as Pidgin). Obviously it also comes standard with Android, and an app is available for it for BBs as well.
Personally, most of the people that I know that use GTalk use it through the gmail client, but I also know quite a few blackberry users that use it from an app.