What it basically will do is give all the mod developers a way so that all mods will work. You won't need a modloader, it will be part of the game. We won't have to open the .jar and put files into the game, just put the mod file (I'd guess it will be a zip or another jar) into a folder and open minecraft and load the mod.
This will also help mods between updates, as some won't have to change anything so there won't be an update needed, Zan's Minimap for example. Some would still need updated for new items, like Single Player Commands would need the new items added in, just like texture packs.
What a modding API is supposed to do is provide a stable environment with which to make mods. With a proper, static, modding API, everyone's mods won't break every time Minecraft is updated the way they do now. It's a guarantee that any changes made to the program will not affect the way the API is used or what it does.