You can make very smooth transitions between tones, you can slide from one tone to another. You can't really do that if you have frets, it's just 'jumps' to the next tone instantly.
Fretless is an entirely different animal.

You can go from having 24 notes to choose from on each string to having infinity, because it's all due to finger positions.

Fretless is a pain to intonate and play spot on (So chords might suffer at first) but it's a very cool thing. Most electric guitarists though don't need/use it very much. But it's cool.
I think it's so that when you're sliding, it reduces the neucance of having to pass by frets, it gives it a very vocal feel to it.
Gonna Leave this town

Gotta leave this town

Gonna make a whole lotta money

Gonna be big yeah...
(Jimi Hendrix - Hear My Train A Comin')

Andy Summers from The Police had one.

And that's what I know about fretless guitars.
Feel free to ignore my ranting.

Member of the Self-Taught Club.

A recent study shows that 8% of teenagers listen to nothing but music with guitars in it. Put this in your sig if you're one of the 92% who isn't a close-minded moron.
Steve Digorgio (yeah, I probably massacred the spelling) from Sadus has a fretless bass, and it sounds pretty ****ing awesome.
that it does, its true the bass sounds like 10 times better than the electric guitar BIG TIME!?!?
[highlight]MY GUITAR[/highlight]
Quote by TheAmaranth
I once broke a G-String while fingering an A minor.

A recent study shows that 92% of all teenagers have moved on to rap music. Put this in your sig if you are one of the 8% who stayed with real music.