The app has 10 sliders that determine the the number of times an image spirals on its edges, the number of times the image is repeated, what parts of the image spirial, along what axis the image spirals and more. There are technical terms for these actions such as "OuterR," "Strands" and so on, but describing them wouldn't serve much purpose. You have to see it for yourself.
The Droste effect is something akin to standing between mirrors and watching your reflection become increasingly smaller and finally disappearing to infinity and beyond. While you still have that image in your mind, think how it might look if you were drunk, and you get the general idea. If you're a Photoshopper or other digital artist, you've may have used a plug-in to create the Droste-style images.
The effect is so popular in fact, there's an Escher's Droste Effect Group on Flickr, some whose members contributed ideas and the algorithms this app is based on.
You can load your own image or choose one of the six pre-loaded, sample images to play with. Once you've had enough spinning around, you can save the picture to your Camera Roll.
The app works as described, although the quality of the results is sort of ho-hum. I don't see myself using this app for very long.
If you like experimenting with filters on your iPhone or iPod touch, I think you'll find the $0.99 price tag reasonable, however.