Update 4/13/08:
Apparently, there is more to the Acid3 Test than just displaying the graphic below correctly. There are actually three parts to this test. Both WebKit and Opera have passed two of the three tests at this point. Thanks for the clarification, Lars!
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The Web Standards Project is always trying to focus those developing and manufacturing for the web to be aware and to implement web standards. The Acid2 Test was for browsers. If your browser could display the smiley face correctly, then you had implemented those standards correctly.
In March, they released the Acid3 Test, which of course, raises the bar even further. Acid3 includes 100 tests that include primarily testing the DOM, ECMAScript, and CSS properties and selectors.
Here is what the result of the test should look like:

Here is what Firefox 2.0.0.13 did to it:

Here is what Internet Explorer 7.0.5730.11 did to it:

As you can see, these two major browsers have a ways to go. So far, two browsers have passed the test — WebKit , an open source web browser, and Opera.
[from Slashdot]