My wife, who is a nurse, chuckles at the computer slang she hears me use. One of her favorite terms is dogfooding. Both the origins of the term dogfooding and the benefits are quite interesting. Nothing says, "fix this problem now!" louder than running into it yourself or the peer pressure when a coworker runs or should I say, steps into it.
We started dogfooding TFS within a subset of the TFS team back in 2004. From there we have expanded to all of TFS, to the Developer Division, to the Office team, and now we are starting a roll out to the big kuhuna, the Windows team (see Brian Keller's blog). With each expansion, TFS improves in performance, scalability, and we learn more about feature gaps and improvements we need to make. This feedback often turns into power tools and future product features. This cycle feeds on itself - as we improve TFS then Microsoft's application lifecycle management improves. This is the dogfood gravy train.
See Soma's blog about what Microsoft uses for software development.
Brian Harry has the June 2007 dogfood stats here.
Sidebar: Some companies changed the "eating your own dogfood" phrase to "sipping your own champagne". I prefer the dogfood phrase because the champagne phrase sounds like you are getting intoxicated about how great your product is from slow/casual (sipping) use. That is the opposite of what you are trying to do.