In the developers own words:
Trackmenot is a lightweight browser extension that helps protect web searchers from surveillance and data-profiling by search engines. It does so not by means of concealment or encryption (i.e. covering one’s tracks), but instead, paradoxically, by the opposite strategy: noise and obfuscation. With TrackMeNot, actual web searches, lost in a cloud of false leads, are essentially hidden in plain view. User-installed TrackMeNot works with the Firefox Browser and popular search engines (AOL, Yahoo!, Google, and Bing) and requires no 3rd-party servers or services.
Trackmenot runs in the firefox background a sends a set of ghost queries to search engines, thus masking the actual query and preventing spammers and data miners from utilizing this information to create user profiles.
TrackMeNot is user-installed and managed by the user. Once downloaded, it resides wholly on users’ system and functions without the need for 3rd-party servers or services.