It's an error correction system, with the penalty of increased latency, depending on the depth of the interleaving (more depth == more error correction == more latency).
Interleaving is set to Auto by Bt wholesale. If your line keeps dropping during testing they will switch interleaving on as this will make your line more stable, but has a slight impact on gaming with pings being a bit higher than normal. However downloads should be faster and web browsing.
The maximum sync rate is reduced a bit but other than that I don't think there's any real difference at all. I had interleaving enabled for a brief period of time on my line and didn't notice any difference in speed.
I am also getting loads of errors and just as well I have interleaving enabled as I don't notice my connection slowing down (I asked to have it switched on BTW):
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