Here's an Agile development scenario. For simplicity, let’s use two month iterations. Marketing says the three features with the highest ROI are a Facebook plug-in, a Second Life plug-in, and an RSS feed plug-in.
You start with the Facebook plug-in. You plan. You design. You create a test plan while the code is being written. You discover potential problems and deal with them. You automate those tests while the code is being written. As the code is written, it is integrated, built and tested continuously; problems are found and fixed immediately. At the end of development, the only problems that remain are the ones that could only be found at the end of development. If you wanted to, you could cut a new release with very little overhead.
Marketing announces that the Second Life plug-in is not as marketable as they had hoped and iPhone support is showing signs of becoming very lucrative. So, you start on the RSS feed support. Now marketing says the Second Life plug-in is worthless but iPhone support is hot, so you add iPhone support. During the whole process, you kept your options open. At the end you have produced more business value than using the traditional process, and you were in a position to start realizing that value much earlier.
To get the primary benefits of Agile, as described above, you don't have to use 3x5 cards or pair programming, and you don’t have to do frequent releases. These things are optional and you can use them or not according to your preference and circumstances.
Next: Achieving the Primary Benefits of Agile