An extension to Emacs MULE system, written by Miyashita Hisashi.
Mule-UCS (where UCS comes from Universal enCoding System) extends MULE by adding support for something better than the ISO 2022 and Code Conversion Language (CCL) systems currently provide in Emacs. In other words, it's a simpler engine for writing CCL programs - CCL is apparently something so evil that mortals shouldn't be exposed to it.
That's the technical explanation. Here's the same for end users in simpler terms: Once you install Mule-UCS, you're able to use Unicode (UTF-7/UTF-8/UTF-16) in Emacs. (Apparently also Big5 to CNS conversion and JIS X 0213 is here.)
It should be noted that the package doesn't support Unicode fonts; It merely provides a bridge between Unicode and Emacs MULE system, and Emacs still uses "national" character sets to display text. This isn't problem, except when you really need to use Unified Han characters (You need to specify in which language preference order you want the characters in).
Full Unicode support will come in XEmacs version 22 (and, I guess, also in GNU Emacs)...
(Sources: Readmes and XEmacs FAQ)