and not very well apparently, I managed to get a 70% discount on their listed price for something by using their referral system (refer 3 people and get yours free) plus targeted advertising
What seems sort of a shame is that at least at one point, their actual software seemed pretty nice ... I used their facebooks apps for a while and I enjoyed them.
There were also plenty of bugs and "issues", etc, however, and after a while it became clear they were overwhelmed or something, and things just kept getting worse. The feeling that I was putting lots of personal data into a database that seemed likely to implode at some point was obviously a big turnoff, and I lost interest.
But if they had been on top of things, it might have turned into something pretty cool (I guess you can say that about most startups though!)...
http://www.crunchbase.com/company/livingsocial