Cyanogen is a replacement operating system for most Android phones. The carrier (AT&T, Verizon, Sprint, etc) won't send updates to phones they sell and they pack a lot of crap onto the phone users don't want.
From the Cyanogen wiki:
Pros
Common reasons to modify your device's operating system include:
- Remove unwanted programs ("bloatware") installed by your carrier
- Receive more frequent security updates
- Have access to the current version of Android - most carriers take months to update devices on their network to the latest version of Android, if ever. Taking control of your OS allows you to update regularly, when you feel like it's time.
Cons
Common concerns include the following:
- Some device manufacturers or mobile providers may offer a limited or voided warranty after modifying
- It is possible that by installing a rooted operating system, you introduce new security risks. For instance, you need to be smart about the permissions you grant applications.
- Non-stock firmware could contain malicious code - which is a good argument for making sure you download custom ROMs from trusted sources, or even better, learn to build it yourself!
- Stability issues may arise when using an experimental operating system. However, for many people, CyanogenMod has proven to be more stable than many official ROMs.