An e-newsletter is basically a good looking email. You write a message, put it in an email, and send it to a bunch of people who receive it (as an email) on the other end. There are three pieces to an enewsletter - content, layout and delivery. You take these three parts, mix them together, and you've got an e-newsletter.

Save printing and mailing costs - Using the net to reach your customers is much cheaper than printed material.
Creates leads - If people like your newsletter they can pass it on to their friends and colleagues.
Keeps you and your company before your customers - Simple way to highlight your full range of products and services
Instantaneous communication - You can send out low cost alerts, updates and messages as frequently as you wish and people can easily respond.
Positions you as a leader in your industry - If you are providing information that is helpful and accurate people will start to look to you for your input.
Strengthen your existing marketing efforts- Your enewsletter leverages your website, printed material and other marketing strategies.

Look at other ways you spend time marketing your business. You take clients to lunch, you ask for referrals, you make cold calls and you attend business meetings.
All of this you do with the hope of gaining visibility, meeting potential clients and reinforcing existing relationships. It's a necessary part of running a small business, but if you think about it, it's very much a hit or miss approach.
An e-newsletter on the other hand, offers all the benefits of these other approaches, but in a much more cost effective and targeted way.
Taking one day per month to connect with your world of contacts is well worth your time, and in terms of ROI, your e-newsletter may quickly become the most systematic, most effective marketing activity your business is engaged in.