The European Union flows over geographic borders to promote the prosperity of the nearly half-billion people living in its member countries. There's no need for passports, so along with meshing tax laws, and a common currency shared by more than half its members, the EU makes commerce among its members and competition with outside economies easier and more productive.
The EU partnership can also make it easier, for instance, for American drugmakers, who have to get the OK from the EU equivalent of the FDA to sell a drug, but not from regulatory bodies in each country.
The common currency of the EU is the euro, although not all member countries accept the euro. The EU is also responsible for the European Central Bank and the European Investment Bank. Countries retain autonomy and send representatives to the various EU decision-making bodies.
First, some history, courtesy of EUROPA, the EU's portal website: The European Union began around 1950, with a backdrop of a desire for lasting peace and prosperity mong neighbors. The six founding members were Belgium, France, Germany, Italy, Luxembourg and the Netherlands. The coal and steel industry was pushing for cross-border unity right at the beginning. In 1957, the European Economic Community, aka the Common Market, was established.
Against the backdrop of the collapse of Communism in the 1990s and the rise of mobile communications, the "four freedoms" were established: movement of goods, services, people, and money.
The European Union also acts like a political body, for instance, sending peace-keeping operations to replace NATO troops in the Balkans.
The 27 EU member states as of March 2009 are: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
Candidate countries at that time are: Croatia, former Yugoslav Republic of Macedonia, and Turkey.
You may notice that Russia, Ukraine, Norway, Bosnia and Herzegovina, and Switzerland are among the missing countries.