Altars are a new type of block which can be crafted using a Zanite Gemstone surounded by 8 blocks of Holystone. By default, it uses Ambrosium Shards as fuel and can enchant several existing items into their more powerful versions. It can also repair items, although this part has been partially covered for by the anvil in 1.4.2.
Currently, right-clicking the Altar with Ambrosium Shards on your hand will allow you to place Ambrosium Shards on the Altar, up to 16 maximum. They will start to spin around the Altar, and the more shards added, the faster it will spin. To remove the shards, right-click the altar with anything else, and the shards will drop out of the altar. You may also place enchantable items such as Holystone or Quicksoil in the altar and if enough Ambrosium Shards are spinning around the item, the newly enchanted item will pop out of the Altar.