They basically break your system into different VM's to isolate things from one another. Compromising the Browser VM shouldn't hurt the Business Secrets VM. One could even have two Browser VM's to separate risky sites from trusted ones. There's other advantages to VM's like for software testing, upgrades, backups, trimming the fat, etc.
The main thing Qubes brings to the table is building one on Xen with lots of usability features to make things easy.