In essence, a better quality oil is used which permits longer servicing periods, but it is combined with oil quality monitoring by the engine management system, so it will tell you how many miles until the next service. Because it's monitoring the engine oil quality, it is able to adjust the service mileage interval based on your driving style. If you do lots of long motorway miles, the service interval will be longer. If you do lots of short, cold-engine urban journeys, the service interval will shorten itself because this type of driving stresses the engine more.
My car is on the long life service, it's up to 90,000 miles now and the engine internals are in very good condition (had to take the cam cover off recently to fix something so was able to have a look).
Some people also do a fixed interval service but use the Long Life service oil! The Audi Long Life Service oil is very good quality indeed.