The first I ever saw to do this was TinyURL:
http://tinyurl.com/now there's SnipURL:
http://snipurl.com/I myself find them useless for most applications. The best thing I've found them useful for (and remember this one John) is using these URL shorteners for when you are limited to a certain number of characters.
Say for example, on one of the forums I frequent (I think it's Bottomgun or Rontinis) you are limited in the number of characters your signature can contain. I was ticked when I couldn't make my signature look how I wanted due to long URLs. Then I found TinyURL and made short links and wham! I had my signature within the limits and it looked how I wanted it to look.