Metadata navigation is a new SharePoint Server 2010 feature that enables users to dynamically filter lists so they can find what they need. Metadata navigation enables users to select filter options, and it handles performing the query in the most efficient manner possible. Metadata navigation consists of two parts. One part is a set of navigation controls that let a user filter a list that has navigation hierarchies and key filters. The second part is a mechanism for rearranging and retrying queries.
Metadata navigation has retry and fallback logic that attempts to perform queries efficiently by using indexes. If a query will return too many results, the query falls back and returns a subset of the results for better performance. If no appropriate query can be made, fallback occurs and the filters are performed on a limited set of results. Metadata navigation automatically creates indexes. Together retry, fallback, and index management make metadata navigation a very important part of working effectively with large lists. There are two kinds of filtering mechanisms: navigation hierarchies and key filters.
Navigation hierarchies use a tree control to navigate hierarchies of folders, content types, choice fields, or managed metadata term sets. This enables users to use a tree control to pivot on a metadata hierarchy, much as how they navigate folders. When users select an item in a hierarchy for a managed metadata column, all items that match the specified term or any of its descendant child terms are displayed. This is called descendant inclusion, and it can be used on fields that are tied to a managed metadata term set. Users can select the item again to filter on only that particular term and not include the descendant child terms. All metadata navigation queries are recursive and display results from all the folders in the list.
Key filters can be configured to perform additional filtering of results within the hierarchy. For example, you can add the Modified By column as a key filter and then type a user name to obtain results where Modified By matches the entered user. For more information, see Metadata navigation and filtering (http://go.microsoft.com/fwlink/?LinkId=219154). The following figure shows an example of metadata navigation hierarchies and key filters.
from : http://technet.microsoft.com/en-us/library/cc262813.aspx