The diesel fuel (which is kept in a separate tank and has its own fuel injector) is sprayed at specific times to control knock (i.e., premature combustion). This greater control against knock allows the engine to run a higher compression ratio which increases efficiency especially at partial throttle. The goal of the project is to improve a Chrysler Minivan's fuel economy by 25 percent. A prototype 2.4 liter turbocharged 4-cylinder engine is being developed that aims to match the power of the traditional 4.0-liter V-6 while decreasing fuel consumption considerably. There is a lot going on in this new engine besides just the dual fuels (i.e., engine downsizing and turbocharging as well as MultiAir valve technology), so it's hard to say how much of the increase is due to the multifuel approach.
The project, entitled "A MultiAir / MultiFuel Approach to Enhancing Engine System Efficiency" is being funded by Chrysler and partners Argonne National Laboratory, Ohio State University, Delphi, and FEV who are putting up $15.5 million, as well as the Department of Energy, which is contributing $14.5 million more. It remains to be seen if the additional cost of the extra complexity of the engine – and the hassle of filling up twice every time you gas/diesel up – will limit the commercial interest. For those of you interested in all the technical details, the full merit review and peer evaluation can be found here.
[Source: Kicking Tires via Green Car Reports]