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Basically WordPress MU is a wrapper around the core WP code that virtualizes multiple blogs. The code that differs is in some bootstrap files, and administration for multiple blogs and users. It's tough to say exactly what percentage of the total code this comprises, but it'd be safe to say that 95-99% of MU is core WP.
You can have unlimited blogs, with unlimited authors on them, and even users who don't have any blogs at all. Users can have different roles (editor, admin, author) on different blogs. The possibilities are only limited by your imagination.
Plugins work just like in regular WordPress, they can be activated and deactivated on a per-blog level. We have something extra called "mu-plugins" which auto-executes any PHP file in that directory, like plugins that are enabled by default. Most plugins work, but some that modify core tables or create tables of their own in the DB might have difficulties, depending on how they're coded. Best way to find out is to test!
In theory a theme could work with WP but not MU, but we've never run into one. So yes, all themes work.
Sure, to MU a domain is just a domain. You can configure it to respond to any top-level domains or subdomains.
Use the Domain Mapping Plugin to map external domains to blogs on your site.
Of course. The latest version of Akismet allows you to hardcode a key into the plugin file and you can put that into your mu-plugins directory to auto-enable it for all your users. However we highly recommend you get at least a Pro-blogger API key for your install and consider the enterprise licenses.
This is a tricky question, it really depends on how many blogs you expect to host, and how many pageviews you expect to get. A single box running both a web server and MySQL server will get you pretty far, probably to about 10-20 thousand blogs. Get something reasonably fast with RAID 5 hard drives. If or when that starts to strain, simply split MySQL and Apache on to one box each, and update the wp-config file as necessary. Always get the best stuff you can afford, and if people are trusting you with their blog make sure to keep backups.
WordPress MU creates tables for each blog, which is the system we found worked best for plugin compatibility and scaling after lots of testing and trial and error. This takes advantage of existing OS-level and MySQL query caches and also makes it infinitely easier to segment user data, which is what all services that grow beyond a single box eventually have to do. We're practical folks, so we'll use whatever works best, and for the more than 6m blogs and counting on WordPress.com, MU has been a champ.
See also How to Scale WPMU
The two are overwhelmingly similar, so if you know one the other should feel pretty comfortable.
KnowNow WordPress Enterprise Edition caters to Fortune 500 companies and may be a good fit.
If your needs are enterprisey, the Automattic Support Network supports WordPress MU and has all the feel-good enterprise stuff. If that's too expensive, your best bet would probably be finding a WordPress-savvy consultant. Of course, there will always be free support on the forums.
The popular pronunciation is to say the letters separately, like EM-YEW. The original intention was for the name to include the µ symbol and to be pronounced "mew". If you're feeling bovine, you can also say "WordPress Mooooo".
Please add FAQs as you see fit.