Turns out this EV button is standard on Asian and European Priuses. It's also available to American drivers if you're willing to hack into your Prius' wiring. Treehugger helps you figure out how. Once activated, the EV-only mode lets you drive up to 34 miles an hour off of the battery's power. The benefit is that the gasoline motor doesn't start up, and starting up is when emissions are highest. Since you're draining the battery in EV-only mode, it's really only useful when you want to move the Prius a really short distance (alternate side of the street parking, anyone?). If you want to hack your hybrid, you can read all the details in this PDF.
[Source: U.S. News and World Report, Treehugger]