It basically tries to make textures appear more crisp by sampling other textures on top of it.
Anyways I figured I'd give it a try and give you some comparison pics:
http://img19.imageshack.us/img19/9629/beforepz.jpg - http://img7.imageshack.us/img7/5066/aftervp.jpg
http://img267.imageshack.us/img267/7277/before2m.jpg - http://img850.imageshack.us/img850/7720/after2n.jpg
http://img804.imageshack.us/img804/8886/before3.jpg - http://img862.imageshack.us/img862/166/after3.jpg
The game also now lists "GPU Transcode" as available in the options, even if you have an ATi Radeon card - but then it'll tell you that your video card won't support the feature (only nVidia GeForce 8xxx or later series support it).
The game also has a benchmark feature in the video settings. It'll give you a score about how well your system will transcode the textures - on an AMD Phenom II x4 965 at 3,4 GHz I got this score:
http://img197.imageshack.us/img197/1410/benchmp.jpg
I'd like to see what score other people get. The score will depend on how fast your CPU is (or GPU if you have GPU transcoding enabled).
Update:
If you find the noise-amount to be a bit too much at times, you can configure the noise amount to apply in the console with the following command:
vt_upsampleNoise X
"X" being the desired amount (default: 8).
Here are some comparisons between different noise amounts:
http://img684.imageshack.us/img684/7900/ups8.jpg
http://img861.imageshack.us/img861/5482/ups4.jpg
http://img849.imageshack.us/img849/3639/ups2s.jpg
Update #2:
Somewhat unrelated to this patch - but the single player campaign of Rage now seems to be available for http://www.bethblog.com/2012/02/02/rage-campaign-edition-now-on-mac/ also!