An example of viral marketing can be found at traffic digger and freeviral.
I've seen several types of viral marketing, but the two most common ones I have seen are as follows:
The first is in regards to list building. You offer a service or piece of information and opt in, when you opt-in you are given the option to send this information to 4 or 5 other people. If you input their information, that is how a list is built virally. Those 5 people put in 5 more names, etc.
The second is in regards to ads for your web site (see traffic digger and freeviral above). You place an add on a page with other people, and promote that page. When other people sign up underneath you to put their add on that page, they advertise your add along with yours. It keeps building from then on.