Gotta say I'm surprised at how many people had no clue what it was, especially considering how much of a hot button topic filtering is on here.
If I remember correctly, the low performance hit of AF (and useable AA) was one of the big reasons for the 9700 Pro being considered so godly.
I can't recall what cards/series it was, but it became such a low performance hit that ever since there's no reason not to use it these days. I assume many games now just auto set it, probably have to with the blurring and other effects (depth of field) that they use so that it doesn't interfere with the overall aesthetic they're going for.
It does have a pretty big impact on image quality. It was a glaring issue in the default settings on Oblivion, so it should be one of the first things you turn on there.