asking what people can do with the xo is like asking what people can do with text- it's an issue of literacy. traditional literacy is called "literacy." capability with numbers and math is called "numeracy." these are both skills vital to lifting yourself out of poverty. does that mean that learning to read and write will make you wealthy? i wish! but you're much worse off without it. literacy opens doors.
in the 21st century, we can't pretend that computer literacy isn't just as important. we've fought illiteracy and innumeracy, and using the xo with the internet and educational tools like the ones people in wealthy and developed countries grow up with and take for granted- that can help even further in the fight against illiteracy and innumeracy. it can also help fight computer illiteracy.
the xo will probably not help more than any other education tool can (potentially) help, but good education as i said is one of the best things you can give to fight poverty. (food and shelter are obvious choices as well, but they don't make education any less important.)
what seems pretty unique about the xo, with sugar, is that it's really a tool for all ages. i'm no more impressed with the problems the first generation of xo's had than anyone else, but i've watched projects like ubuntu start out impressive (with just as many problems) and mature in amazing, unexpected ways. it's reasonable to expect the same of the xo, from its hardware to the services, and the right amount of criticism will probably help.
that said, i wish i could buy one for every 5 year old on earth. i was lucky to grow up with pc's, and i want that for the next generation, and i remember the tools that taught me very clearly. i'm not too much impressed with the tools we've made for the next generation, but some of the most impressive tools i've seen for teaching computing are included with the xo. my biggest complaint is that we can't teach adults to learn how to play again, because if they could do that they could become programmers just by playing with the xo. it has many layers of subtle brilliance, and includes the first version of redhat i've been able to enjoy "playing" with (redhat is a serious tool, about as serious as any) since it was called redhat.
from moment you use sugar, you're taught to point and click at things. honestly, there are adults who struggle with that, only because they're afraid. we need more friendly, inviting playthings for the pc. tasking, searching, interacting, typing, scrolling, coding, drawing, dragging and dropping, thinking. the world is full of adults as threatened by computers as illiterate adults are by words. this is a kind of impoverishment, even in the wealthier nations.
imagine being someone who is unable to work a radio in the 40's or a television in the 70's. imagine the world of information you'd never have. "knowledge is power." if i had to choose between giving a child an xo, and sending them to a school without computers, i'd give them an xo. giving them an xo and sending them to school is probably better. mind you, even i'm not trying to say the xo is the greatest thing ever invented. it's a really good idea. it would look less impressive next to better classes, but how do you have better classes? i really think we need classes taught by computer literate teachers. if olpc is successful, we'll have computer literate teachers for the next generation of students, and we'll have learned a lot about how to teach them computer skills.
but let's boil down all the talk of utopian ideals, let's just say that if you could get books- interesting, informative, up to date books- not stale, outdated, boring books- into the hands of every student, it would make a world of difference. computers (like the xo) make that very easy. oh sure, you can make e-readers, but there is no publisher more universal than the net itself. you can have a country of information- that's a publisher- or a world of information like the net. but you need access... even as an e-reader, the xo is worth it. now imagine an e-reader that can not only show e-books, but help you create them. not only an e-reader, but a web browser. not only an e-reader, but tools that teach you how to write software?! i almost think people can't understand the education the xo represents because they don't have a deep enough experience with computers- but i say that with no malice.
teachers that continue teaching should be expected to continue learning; it's an absurdity to have 19th century expectations of 21st century educators. granted they shouldn't have their time wasted (more than students,) or be paid insulting salary.