A lottery style gambling site with 99% payout of a monthly jackpot to an almost always sole winner.
The winning selection of lottery numbers for determining the winner or winners are the results of the Western Canada Lottery Corporation draw. The website mentions that if it's feasible and secure, the random numbers may come from the Bitcoin network itself in the future.
The Bitcoin transaction hash of the 1 BTC purchase is used as the "pick" and to see who sent it, and therefore know where the winnings should go. The algorithm for converting the winning lotto numbers to the characters in the entrant's Bitcoin transaction hash is documented on BitLotto's site.
When a winner is paid, the funds are sent to the Bitcoin address that bought the winning entry. It will not work if the user buys the ticket using a shared Bitcoin service where the user logs into an Bitcoin account over the internet. The site clearly states many times, that as long as the user buys the ticket using Bitcoin software running on their own computer, they will not run into a problem.
The service was launched on April 6th, 2011.