RECCO is extensively used in the mountain areas of Europe. Many clothing manufacturers and equipment makers are incorporating the small diode into their clothing, boots, skis, etc.. In Europe, the handheld finder devices are not only deployed with patrollers at the ski areas, but mountain rescue helicopters are also outfitted with huge finders hung from the underside of the helicopter. It is an "analog" sound based technology, much like older avy beacons - the operators of the finder devices must wear headphones, and the louder the signal the closer you are to the diode. In the case of the rescue helicopter, an operator sits in the chopper with headphones attached to the large finder beneath the helicopter and guides the pilot to the loudest source.
The RECCO technology is not as widespread in the United States. Until the diodes become more common in clothing, etc., it will not be the "first choice" to find victims under the snow. Personally, I don't think it will ever replace beacon technology and it was not meant to - I believe the original intent of the system was to allow rescuers to find people in avalanches who are not wearing beacons. So, when an avalanche occurs inbounds at a ski area, the RECCO is a great tool to use.
Many people have the diodes in their ski clothing and/or equipment and don't even know it. The diodes are the size of a quarter and completely flat and can be integrated into many objects.
The RECCO manufacturers provide local SAR groups (including all groups in Colorado) with free handheld finders, and we practice with them occasionally. RECCO finders are also able to pick up the signal off of ANY diode (although the signal is much weaker, so you have to be much closer to the source to hear anything) so you can get a signal off of a cell phone, radio or beacon that is not turned on, or has dead batteries.
JP is mostly right -- when you are in the backcountry, you are not going to be carrying around a RECCO finder. Your buddies with beacons, shovels and probes are basically going to be your only way for getting out of an avalanche alive. The RECCO will be used when SAR teams show up later, to find the bodies of people in avalanches that are not wearing beacons in the backcountry. Reference:
http://www.avalanche-center.org/News/2005/2005-12-31-germany-recco.php, "Although similar in search procedure to transceivers, the RECCO system is not intended for companion rescue and works as a complement to transceiver use in the backcountry."
The RECCO has been used to check avalanches across I70 to see if there were any cars in it. There are enough diodes in a car, that the RECCO was an efficient way to quickly clear the avalanche debris and make sure that there were no vehicles in it.
History and how it works here:
http://mcsenca.spaces.live.com/Blog/cns!660BF380116AEAB4!368.entry