Rahul has a very nice post up describing the benefits of functional spec writing. Usefully, he also points at the wealth of spec writing information that is JoelOnSoftware.
We are now devoting more time to this sort of thing than we may have in the past, and early returns indicate that it seems to be working out quite well so far.
As a preface, let me just say that I don't know much about anything. Nonetheless, with reasonable regularity, I have promoted the process described by Rahul for the last year and a half to most people who are willing to listen - and I am thrilled about this development!