It works. It will rip the fat off you quite quickly!
However, as a drastic diet is does have some issues to be ready for.
It is quite possible to be negatively affected mood wise. I think this could be due to low carbohydrate levels. If you don't regularly have to deal with situations that test your patience, then you may not notice this.
An extreme drop in calories of this nature has your body making adjustments. If you are exposed to cold and flu containing environments I think you are less able to resist. Take your vitamins, get lots of sleep and do what you can to minimize your exposure.
When you finish, due to low carbs and low calories, your body is very ready to put weight back on. Luckily, this is balanced by another strong plus -- your eating habits and mental viewpoints towards food can be greatly affected in a positive way.
However, if you found it necessarily to bail out of the diet before adjusting your habits, you would want to do so in a controlled way.
That's all I can think of off the cuff. I did it last year and might do it again this year if I find summer approaching faster than my goals.
Oh, one final note, do use the supplements and guidelines as outlined by Chris. They are vital in helping to preserve muscle mass and help control appetite. A lot of people make huge changes and then expect to get the same results as the velocity diet.
If you want the results of the velocity diet, do the actual diet!
Oh, and numbers wise, I lost about 13 pounds in two weeks while maintaining strength in my lifts. I only did about half the full diet as my work environment was mentally trying... and I needed to get back to a higher carb level to stay sane.