Memories can be viewed personally, sent to your friends, or added to your Snapchat story. A snap taken more than 24 hours ago will appear with a frame around it in your story to indicate that it is older.
Memories are categorized, so you can search for keywords such as "dog" or "Hawaii" to easily find specific Snaps and Stories related to a particular night out, vacation, anniversary, birthday, or other occassion.
Memories also includes a My Eyes Only feature that makes personal snaps viewable by you only when showing your Memories to others.
Snapchat was updated today, but Memories will continue to roll out selectively over the next month or so.
Snapchat is free on the App Store [Direct Link] for iPhone and iPod touch.