Despite people's previous, mistaken belief that this unearthly glow was caused by some form of magic, it has since been realized that foxfire is the result of bioluminescence coming from fungus growing in decayed wood. Most of the time, these fungi emit a bluish green light that tends to be very dim, though it can become bright enough to read by. The light itself comes from the oxidizing reaction between luciferase and luciferin. The purpose of this light is unknown, but it likely attracts insects that will disperse the fungus' spores, or it is meant to ward off animals by indicating that the fungus is poisonous. There are many different species of foxfire fungus, but the most common one seems to be armillaria mellea.
More foxfire. Source
Historically, foxfire has been used for many purposes. These fungi produce a bright light and are very durable. Benjamin Franklin recommended that it be used as lighting in an old version of a submarine and there are reports of it being used as a natural lantern. Not to mention all the references to it, and uses put forth, in literature.
Foxfire is a fairly mysterious phenomenon, but that only serves to make it more interesting. I wish there were more I could say, but for now I recommend trying to find some this summer. I won't recommend you touch it.