Welcome to the new Christmas theme.
Terraria is the lovechild of Minecraft and an unwary Metroidvania title. Players mine, fight monsters, build settlements, discover underground cave systems, die horribly and repeat. Terraria is a very self directed sandbox, meaning for the most part, you'll set your own goals.
The mechanics are pretty simple, mining up any block in the world will add it to your inventory, and most items can be placed back into the world in new configurations. Most of any world will be made out of dirt and rocks, rocks can be refined into bricks, or used to build settlements as is. Wood can be converted into a number of different objects ranging from walls, to torches, to furniture, and even specialized crafting stations.
Crafting is a major element of the game, it is deceptively simple at first, but deeper levels of crafting involve multi-stage crafting with distinct crafting stations needed to produce individual elements of a finished piece. This can lead to some frustration as it is not always apparent why something cannot be crafted. The game has a guide, who can gleefully tell you everything that can be crafted from a given component, what the other elements in the in the recipe are, and where you'll need to craft the item.
If the idea of being able to make this and then beach the jellyfish doesn't appeal to you, this might not be your game.
The game has some obtuse rules when it comes to various elements. For instance: crafting a depth gauge or watch requires a table with a chair next to it, an unusual crafting station, for the game. Similarly the Alchemy Station is created by adding a bottle to a normal workbench, so the guide will blithely inform you that the mushroom you picked up requires a pair of bottles and an alchemy bench to turn into a health potion, but he won't tell you how to get bottles, or, for that matter, the glass to make the bottles.
Crafting isn't the only thing affected by this, however. The interaction between bosses, the shadow orbs, and meteorites is unexplained, what defines suitable housing for NPCs, how to enable, and the effects of hard mode, the results of getting to 200hp, how to raise your permanent HP, and many other systems are basically unexplained. While some of these are fairly self explanatory or easily understandable through some experimentation, other systems presume knowledge of the system in question. This is may be a somewhat invalid point, given the completeness of the existing wiki, but, the game itself doesn't explain these rules consistently.
Pregenerated items unlock new abilities, such as the grappling hook, or a double jump.
The game has been releasing fairly substantial content updates. The most recent patch (v1.1.1 on 12/15/11) only added a few new enemies and a snow biome, but the preceding update (v1.1 on 12/1/11) was a massive update including a new lighting engine, new enemy types, another new biome, rules for a new hard mode, a new background, and so on. These updates seem to require the player to generate a new world to take advantage of them. However the game already stores characters and worlds completely independently, so any equipment a character has accrued on one world can easily be transferred over to a new one.