The app allows XBL members to watch pay-per-view events (after paying, of course), control playback with Kinect, and (for Gold members) communicate with other viewers on your friends list to make predictions about the outcomes of fights, even "competing" to top the watching-UFC leaderboards.
After downloading the app, you'll have ten days to get a party together to watch UFC 141: Lesnar vs. Overeem. And in the run-up to that smash-up, Xbox Live Gold users can watch the weigh-in and other related videos either live or through the app's "on-demand library."
Update: Microsoft told us that all XBL users can watch pay-per-view videos. Gold membership is required for live pre-fight and other supplementary videos, "Fight Picks," and the Interactive Fight Card.