Sorry, can someone please give an overview of what this is and how it works (I did not find any detailed examples on the site).

My understanding is that its an alternative javascript engine that can be modified (using javascript itself I assume) and those modifications packaged and shared.

Is that right? I was looking for an example of how you modify the engine and what can be modified. Any ideas?

That directory is out of date. (I'm not sure why it hasn't been removed yet.) The new project page is here: https://github.com/mozilla/narcissus

We moved it to GitHub to make it easier for people to submit pull requests and the like.