I had read about Swype in several places before getting my Droid X, but I didn't mess around with it until recently. And wow!
On the Droid X, Swype was already part of the system - it is the alternative to the regular keyboard. It works by apparent magic, remembering words you entered (I use a lot of shorthand that the regular keyboard kept "correcting" for me), and just somehow "knowing" what word you want to enter. It's fun, too.