Service fees charged by credit card companies are the bane of small businesses. Dwolla is hoping to do away with those. The company links to users' bank accounts, transferring money to merchants when they make a purchase.
The benefit for users is they don't have to worry about high bank fees. (Dwolla only charges 25 cents for transactions over $10 – and lower amounts are free.) Merchants don't have to pay anything to the company for the transaction, increasing their profit margins. All that's needed is an Internet connection.