My experiences with improv comedy are limited to the performances of Without a Box, a student group at the Claremont Colleges and that show with Drew Carey. The format is like that of sketch comedy, only the material is made up on the spot by troupe members as influenced by suggestions from the audience (sometimes helpful, sometimes not). Results may vary, but if you've got a quick, enthusiastic group of actors playing, their interactions with each other and the audience seldom fail to be hugely entertaining, even when a skit flops.
For example, one actor might play an ad executive brainstorming slogans, with a few of the others playing ad writers, and the audience suggesting products to be pitched. "Rugby: it's not just for one-eyed drunken Australians anymore." "Beer: it's what's for dinner." and so on.