A USDA loan is a purchase loan that allows up to 100% of the cost of the home to be financed. Currently (2009) USDA loans are one of only two programs, the other being VA, that allow for no down payment. USDA loans are available only in rural areas, are were enacted to counterbalance  the difficulty of obtaining a loan out in the boondocks. 

What is the USDA's involvment in the loan? 

Yup, the USDA does more than Grade Beef, the Rural development branch of the USDA is responsible for setting the guidelines on USDA loans.

Who Qualifies for a USDA loan?

Unlike an FHA loan, USDa loans are only available in rural areas.  Some states, New York, for example are not eligible for USDA loans at all, even in the rural areas. 

The USDA set's both loan size and income limits. Like an FHA loan, the max loan size varies depending on the median housing price in the area. The max loan limit may be $150,000 in some areas an up to $400,000 in others. 

The USDA also sets income limits. The USDA loan program was initially developed for people in rural areas that were unable to get conventional financing (most lenders prefer lending on urban properties vs. rural). For this reason, the USDA limits its programs to people typically around or below the median income range for an area.