I've been getting a fair amount of mail about Multiply, so I thought I should clarify some things. I wrote it mostly because I wanted to see if it could work, not because I wanted the functionality or thought that it was a good idea. It is not under active development -- I'm not even using it myself.
It does work (for the moment), but there are pretty good reasons not to use it.
It works in a way I've consistently described as an abuse of the plugin system, by exploiting the way WordPress does things and changing things that weren't meant to be changed. If WordPress itself changes enough, and there are some fairly big things coming in 1.6, then it will not work at all. In the very worst case, I'll provide a script to turn all Multiply blogs into full WordPress installs, but then you're in the same position as if you'd just used multiple installs in the first place.
The best reason is WordPress Multiuser. It's official, supported, under active development, should scale better, and has more features. Where's the bad? The changes to it since Multiply was released -- global users table, phasing out reliance on the hated Smarty, etc. -- have more or less invalidated every reason I had for not wanting to use it.
You can already fake alternate blogs by using category inclusion/exclusion (e.g., post your cat photos in the "omg i ♥" category and filter them out of the normal blog, then view them elsewhere). There are a couple of linklog plugins around if that's all you need.
Multiply's multi-user features are spotty, so it works best for a single user with multiple blogs. If you have more than a very few users, you're definitely better off with WordPress μ. And don't even think the words "weblog farm".
Technical support is so limited as to be basically nonexistent. I haven't been able to reproduce, let alone fix, most of the errors reported to me.
I still have pride in my work, of course, and if I were to start a second blog today then I'd be using Multiply, but I'm well aware of its limitations. Please, unless you're sure you know what you're in for, at least try WordPress μ (or one of the other solutions) first. I don't want the guilt if something goes wrong... ;)