Different variations in the URL of a page can cause duplicate content warnings in search engines and get you penalized. Canonical URL works similar to a 301 redirect, but instead of actually redirecting, it tells search engines which page to use for their indexing, supported by Google, Yahoo and Microsoft.
You can read more about it in the official blogs:
http://googlewebmastercentral.blogspot.com/2009/02/specify-your-canonical.html
http://blogs.msdn.com/b/webmaster/archive/2009/02/12/partnering-to-help-solve-duplicate-content-issues.aspx
http://www.ysearchblog.com/2009/02/12/fighting-duplication-adding-more-arrows-to-your-quiver/
The module also let's you set URL parameters to hide. By default the module hides the URL parameters oderby, orderway and n.
You can also set a default domain name to be used. If you are displaying the same site on multiple domains, this will point search engines to one site without redirecting your users.
The visitors won't notice any difference and they won't be redirected to another page, increasing the perfomrance. The existing links can be used as they are.
When friendly URL is on, the module automatically generates the rewritten URL for the following pages:
* Product Page
/product.php?id_product=1 => /music-ipods/1-ipod-nano.html
/1-ipod-nano.html => /music-ipods/1-ipod-nano.html
* Category Page
/category.php?id_category=2 => /2-music-ipods
* CMS Page
/cms.php?id_cms=1 => /content/1-delivery
* Supplier Page
/supplier.php?id_supplier=1 => /1__applestore
* Manufacturer Page
/manufacturer.php?id_manufacturer=1 => /1_apple-computer-inc