As usual Nsxtasy is right on ! Specially about the point on the finding out about the negative information on the car. Its a good way to see if there any accident/flood/mileage problems. Its not a guarantee that such an exisiting problem with specific car will show up on carfax (and in some cases they dont) but if they do show up, its a first step to elimnate that car from your search or not proceeding further, if you choose to.
If the carfax comes out clean, then you can proceed ahead, but still have to inspect the car for any signs of problems (mileage,accidents, etc) that might not have showed up on carfax, if there is any.
There is another competitor to carfax and its called Autocheck. Its the one used by ebay when you click on the history report. Carfax is obviously more popular, but the advantage to Autocheck is that you get 60 days of membership instead of 30 days as you do with carfax.