Heat pumps use basically the same technology as air conditioners - or refrigerators for that matter: electric energy is used to pump a working fluid through a system that exchanges heat with the air or water inside the house, goes through a pressure reducer, exchanges heat with the outside (directly or indirectly through another loop), and through a compressor - the direction of circulation determines whether the system heats or cools the house air (or hot water).
Heat pumps and air conditioners can work fine just exchanging heat with outside air. However, that can become much harder and less efficient when the outside air is very hot (in summer) or very cold (in winter, for heating, where ice can form on the outside pipes). A better solution is to exchange the heat directly with the ground: the following diagrams from the GeoExchange organization help explain how that works:
The actual layout of the pipes used to exchange energy with the ground may be vertical or horizontal - a horizontal example for a residential case is here:
So, we all know air conditioning creates a big demand for electricity in the summer - how does this help, since we still need electric energy to drive the heat exchange? In particular, from the discussion of energy units here, converting from fossil fuels to electricity already loses a factor of 3 in real energy content, not including transmission losses. So direct use of electricity for resistive heating would be very inefficient, compared to just burning the fuel in your house.
But in fact, GeoExchange units can more than make up that factor of 3 in heating, and are similarly efficient in cooling, due to the relative constancy of ground temperatures and the efficiency obtainable in the exchange systems. The GeoExchange comparison page claims efficiencies of 2.5 to 4 times that of resistive heating are typical for geothermal systems. The additional advantages, beyond whatever net efficiency there may be, are in two areas:
So this is one alternative approach that can both save you money and be a significant step towards the future technology base we need for residential heating and cooling.
As with most alternatives technologies, the main problem is up-front capital costs: typically a few thousand dollars for a residential installation. Many states and local energy utilities provide incentives - check in your area for details. Geothermal heat pumps are definitely worth paying attention to, especially in this winter of high heating costs.