Android has a unique method of process trimming which is built in. This process trimmer uses a "threshold" system which examines "free memory" (RAM memory, not file storage memory such as system flash). There are a variety of thresholds used to determine when a process should be "reaped" (or killed, if you like); the threshold used depend on the running class of the process (foreground, background, active, idle, et cetera).
The purpose of having a process trimmer is so that your phone won't freeze up if you try to run too many apps at the same time - but also allow apps to sit idle if there is enough free memory.
Under normal circumstances, the parameters which set these various thresholds are set at bootup time in files which are part of the boot image's ramdisk. So, they are essentially read only, as you would have to replace the boot image in order to modify them. On the other hand, they can be injected into the running kernel - and that's what Autokiller is for:
It merely allows a convenient way for a root-privileged app to change those values from the defaults. This allows user - tuning of the built-in Android process harvesting mechanism.
If you set them to a high value, your phone will be be really snappy, but you won't be able to do much multitasking, and you will find things happening such as having your launcher/home application having to start up every time you go back to a home page; but on the other hand, if you set them too low, there will be very little "free memory" available for the kernel to perform file caching activity, and your phone will slow down to a crawl.
To first order, it has nothing to do with battery life.
SetCPU is very useful for preserving battery life - look at other threads for suggestions.
Task killers no longer work correctly in Android 2.2 - the APIs which were present in Cupcake, Donut, and Eclair were removed by Google, and so task killers are very limited in what they can do in Froyo-based ROMs; they barely have a purpose any longer in a 2.2 context. (Other than maybe using them as a task switcher).
If you think your phone runs sluggishly without a Task Killer on Froyo, you can up the Autokiller thresholds a little bit at a time to see if you see an improvement. Note that the built-in Android process reaper is a little bit smarter than "task killers", too. So, if task killers were questionable in 1.5, 1.6, 2.01, and 2.1 - they are entirely unneeded in 2.2 - especially because you can tune the built-in process reaper using Autokiller.
eu1
[ Edit ] Dang. scary alien beat me to the punch - again.