Character animation is the first use of vertex shaders. If you remember, ATI has been evangelizing the "matrix skinning" possibilities with their RADEON. This feature earned rave comments from developers for its ability to make skin stretch and joints bend realistically. ATI boasted twice the number of hardware-accelerated matrices as the GeForce2 GTS (4 versus 2). Now, with the GeForce3, up to 32 different control matrices can be used to define a characters skeletal structure! The image below is an NVIDIA technology demo showcasing the capabilities of the vertex shader on facial animation and keyframe interpolation (another feature ATI has touted with the RADEON).
Secondly, environmental effects like elevation fog, refraction effects, and heat wave effects are possible using the vertex shaders. The effect of photographic lenses is another effect that can be applied to a scene. Using a special transformation matrix, fisheye lenses, like the one shown below can be implemented through DirectX 8. This sort of transformation was not possible with the static T&L pipeline of previous versions of the API.
In addition to the environmental effects we just discussed, the GeForce3's vertex shader will be able to apply procedural deformations to objects. First, movement can be applied to static objects - flags waving in the breeze or an animal's chest expanding and contracting with each breath. Secondly, static effects can be applied to surfaces such as the impact of a bullet or realistic damage that is modeled to a car in a racing simulator.
One downside to both the GeForce2 GTS and ATI's RADEON is a fixed number of hardware lights than can be applied to each vertex. Using the GeForce3 in conjunction with DirectX 8, a theoretically infinite number of hardware lights can be applied using the vertex shader.
These are only a few of the possible effects that can be applied. Others include custom lighting effects, morphing, and even the motion blur feature that 3dfx's T-Buffer hyped. The main idea to remember is that the shaders are programmable, so by the time DirectX 8 games start shipping, there could be a veritable library of new effects.