The point-free style is considered by some author as the ultimate functional programming style. To put things simply, a function of type t1 -> t2 describes a transformation from one element of type t1 into another element of type t2. The idea is that "pointful" functions (written using variables) emphasize elements (when you write x -> ... x ..., you're describing what's happening to the element x), while "point-free" functions (expressed without using variables) emphasize the transformation itself, as a composition of simpler transforms. Advocates of the point-free style argue that transformations should indeed be the central concept, and that the pointful notation, while easy to use, distracts us from this noble ideal.
Point-free functional programming has been available for a very long time. It was already known by logicians which have studied combinatory logic since the seminal work by Moses Sch?nfinkel in 1924, and has been the basis for the first study on what would become ML type inference by Robert Feys and Haskell Curry in the 1950s.
The idea to build functions from an expressive set of basic combinators is very appealing and has been applied in various domains, such as the array-manipulation languages derived from APL, or the parser combinator libraries such as Haskell's Parsec. A notable advocate of point-free programming is John Backus. In his 1978 speech "Can Programming Be Liberated From the Von Neumann Style ?", he wrote:
The lambda expression (with its substitution rules) is capable of
defining all possible computable functions of all possible types
and of any number of arguments. This freedom and power has its
disadvantages as well as its obvious advantages. It is analogous
to the power of unrestricted control statements in conventional
languages: with unrestricted freedom comes chaos. If one
constantly invents new combining forms to suit the occasion, as
one can in the lambda calculus, one will not become familiar with
the style or useful properties of the few combining forms that
are adequate for all purposes. Just as structured programming
eschews many control statements to obtain programs with simpler
structure, better properties, and uniform methods for
understanding their behavior, so functional programming eschews
the lambda expression, substitution, and multiple function
types. It thereby achieves programs built with familiar
functional forms with known useful properties. These programs are
so structured that their behavior can often be understood and
proven by mechanical use of algebraic techniques similar to those
used in solving high school algebra problems.
So here they are. The main advantage of point-free programming are that they force a structured combinator style which makes equational reasoning natural. Equational reasoning has been particularly advertised by the proponents of the "Squiggol" movement (see [1] [2]), and indeed use a fair share of point-free combinators and computation/rewriting/reasoning rules.
Finally, one cause for the popularity of point-free programming among Haskellites is its relation to category theory. In category theory, morphisms (which could be seen as "transformations between objects") are the basic object of study and computation. While partial results allow reasoning in specific categories to be performed in a pointful style, the common way to build, examine and manipulate arrows is still the point-free style, and other syntaxes such as string diagrams also exhibit this "pointfreeness". There are rather tight links between the people advocating "algebra of programming" methods and users of categories in programming (for example the authors of the banana paper [2] are/were hardcore categorists).
You may be interested in the Pointfree page of the Haskell wiki.
The downside of pointfree style is rather obvious: it can be a real pain to read. The reason why we still love to use variables, despite the numerous horrors of shadowing, alpha-equivalence etc., is that it's a notation that's just so natural to read and think about. The general idea is that a complex function (in a referentially transparent language) is like a complex plumbing system: the inputs are the parameters, they get into some pipes, are applied to inner functions, duplicated (x -> (x,x)) or forgotten (x -> (), pipe leading nowhere), etc. And the variable notation is nicely implicit about all that machinery: you give a name to the input, and names on the outputs (or auxiliary computations), but you don't have to describe all the plumbing plan, where the small pipes will go not to be a hindrance for the bigger ones, etc. The amount of plumbing inside something as short as (f,x,y) -> ((x,y), f x y) is amazing. You may follow each variable individually, or read each intermediate plumbing node, but you never have to see the whole machinery together. When you use a point-free style, all the plumbing is explicit, you have to write everything down, and look at it afterwards, and sometimes it's just plain ugly.
PS: this plumbing vision is closely related to the stack programming languages, which are probably the least pointful programming languages (barely) in use. I would recommend trying to do some programming in them just to get of feeling of it (as I would recommend logic programming). See Factor, Cat or the venerable Forth.
