The theory: GI stands for Glycaemic Index diet. Developed in 1981 by a Dr David Jenkins, the GI diet ranks foods according to the effect they have on the body's blood sugar levels. Foods that have only a slow, small effect on blood sugar have a low GI value, while those that cause a large and rapid rise in blood sugar have a high GI value. Eating low-GI foods releases sugar slowly into the bloodstream and ensures a steady supply of energy. The GI diet is all about concentrating on eating these low-GI foods and avoiding the high GI ones.

The upside: Research has shown that GI diets generally improve the levels of "good cholesterol" in the body and therefore could help prevent heart disease. You also don't feel like you're being deprived as you can have a little of what you fancy.
The downside Unless you really know your stuff, it's difficult to work out the GI value of a meal. Some low-GI foods are also full of fat and salt, so unless you know what you're doing, you could be eating unhealthily, despite eating low-GI.

So does it work? Yes it does, with the added bonus that it's one diet that dieticians actually seem to like! It's a very balanced approach and advocates all the basic principles of healthy eating that other diets like the Atkins diet, fall short on (like five portions of fruit and veg per day for example).

Further reading:
The GI Diet: The Easy, Healthy Way To Permanent Weight Loss
Living The GI Diet: To Maintain Healthy, Permanent Weight Loss