I don't know about "overclocking" either.
When you are logged into a system as root (the root user) you have admin rights...full access. Out of the box you do not have full access to do whatever you want with your phone. The OTA (over the air) update we got opened the door for some to figure out how to gain access to "root". With that accomplished they could move forward and modify the phone. The CPU runs at 600mhz normally and Motorola slowed it down (underclocked) to 550mhz. This was most likely done to save battery power. With root access on your phone it is possible to install software, replace the kernel, replace the operating system and enhance what we have already. There are folks running their CPU twice as fast as it comes out of the box. There are people who now can take their laptop to a remote location with no wifi or network access and have it connect to the internet (tether) through their phone and the cell towers. Custom themes, new apps, faster response times.
At the same time, such activities can lead to an entire day posting questions every 30 seconds in a forum if you don't follow directions or read up on what to expect before hand. Even though this 5 dollar app removes some of the fear factor it isn't 100 percent plug-n-play. It also voids your phone's warranty....but nobody's wrecked their phone either.
Read this:
http://www.droidforums.net/forum/dr...-app-roots-ocs-multi-touches-tethers-5-a.html
and this thread
http://www.droidforums.net/forum/dr...-sholesmod-2-0-1-baegel-updated-2-4-10-a.html and even if you decide not to root yet you'll be enlightened.