Google's Developer Programs Tech Lead, Maile Ohye and Crawl Team, Mehmet Aktuna wrote a detailed blog post on best practices for faceted navigation. Most faceted navigation are on large sites with filters, such as e-commerce sites with a lot of filter options, or large content sites with many filters and so forth.
Here is a picture Google used to describe it:
I am a bit surprised how much Google wants you to block a lot of the navigation, as opposed to using rel=canonical. But maybe I am reading into it too much.
Faceted navigation, such as filtering by color or price range, can be helpful for your visitors, but it’s often not search-friendly since it creates many combinations of URLs with duplicative content. With duplicative URLs, search engines may not crawl new or updated unique content as quickly, and/or they may not index a page accurately because indexing signals are diluted between the duplicate versions.
So if you have a huge site with faceted navigation, you should 100% read this blog post.
Forum discussion at WebmasterWorld.