The app (called World Wide Telescope) is a real-time simulation, so it shows the night sky as it would appear from wherever you're virtually standing at the time you're doing so. It works during the day, too.
After going to Bing, you just activate the app, go to street level, then pan the camera up. The lighting will dim on the buildings and streets surrounding you (though you can still see them) and the stars will become visible in the sky, with several customizable overlay options.
The app is accompanied by collections of data from different space projects. You can browse through objects Hubble has discovered or locate active supernovas in the sky.
There are tons of sites for backyard astronomers out there already, and two years ago Google implemented a star-browsing feature in Google Earth, but it only worked in the desktop application (as opposed to maps.google.com) and it wasn't integrated with Google's own street view feature. Microsoft is showing off with features like this — sure, stargazing doesn't serve a practical purpose, but it's cool.
Here are some pics of the Bing app in action. It's expected to go live sometime today.
Update: We've also embedded a video of a TED presentation in which this app was demonstrated. Thanks, leojr!
TED: Blaise Aguera y Arcas Demos Augmented Reality Apps