If you haven't read the FairTax article on Wikipedia, you should.  It's a very good place to get started learning about it.

The FairTax (H.R.25/S.25) is a proposal for changing United States tax laws to replace all federal personal income taxes, payroll taxes, corporate taxes, capital gains taxes, self-employment taxes, gift taxes and inheritance taxes with a national retail sales tax and monthly tax rebate to households of citizens and legal resident aliens. The FairTax would be levied once at the point of purchase on new goods and services. The plan would abolish the Internal Revenue Service (IRS) and create a federal "Sales Tax Bureau" to oversee collection of the tax by existing state sales tax administrations.^[1][2] While the FairTax replaces taxes like FICA, it does not remove or change government funded programs such as Social Security, Medicare, and Medicaid.