The web embedded font tool allows one to take a font, and create a font object, generally with only the necessary characters to be used, in a compressed format. Thus making the font object supposedly smaller in file size than the original font. If a non MS browser hits the page, then a default font is shown that they do have on their system. Otherwise, then yes, you could display any "legal" font you wanted without issue in MS Browsers. Additionally, the font object WEFT created could not be used on any site but the domain that it was created for and could not be used in the manner of a traditional font on a PC/Mac such as TrueType or PostScript fonts.
Aside from the fact that this tool has not been updated in over 3 years, it is also only a Microsoft feature. Although, I dunno whether newer browsers such as Firefox support such, but I doubt it. At one point, the Netscape browser had it's own enbedded font type available, via a third party Font distributor (I dont remember now who), but that too was a pain in the wazoo to use and implement.
When I want to display a certain off-the-wall font style, either of a font that I have created to sell, or just to add flair to a web page, the tried and true gif or jpg file is what most use today. As a matter of fact, I couldn't tell you the last time I saw a WEF site in use. And you'd know it. The pages are slower to load, and often jittery. The font object has to load just like any other web page file, and then the browser has to substitute text for the font object.
I do not see a future for it. It was new... a fad... and now, pretty much forgotten. (IMHO) I've not used that since 2001 or 2002. So I can't attest to it's viability today with IE7... or any browser for that matter.