Also refered to as a Ranked Voting System, the operation of preferential voting requires the voter to place a number "1" against the candidate of their choice. Voters then place the numbers "2", "3", etc., against the other candidates listed on the ballot paper in order of preference.
The U.S. currently employs the Simple Majority (First-Past-The-Post) system. This means fringe political groups can "steal" a voters one vote from a more mainstream candidate. This happened in 1992 (Ross Perot) and 2000 (Ralph Nader).
With a preferential system, power to the center is restored as mainstream political parties are no longer compelled into pandering to these fringe elements, and fringe voters will no longer feel they are wasting their vote on a candidate with a long-shot of winning.