The memory footprint is the smallest in its category of products. I think Microsoft did a very good job squeezing as many features as possible in such a tiny executable. The price, being it free, it's of course a plus. And the capability to do almost everything as in the commercial version. When using a developer machine or also a virtual machine, it is essential that every MB of memory is well utilized. The binaries are loaded in memory only when needed. It uses the same client libraries as its bigger siblings, including the Native client. Unlike the Compact version which uses a limited set of functionality this LocalDB has Stored Procedures, Geometry, Geography data types, online backup, transactions, data integrity etc. It runs as a separate process as opposed to in-proc DLL.
For the development process and for small Business Intelligence projects, this software gives a very good head start because the installation is merely seconds. It runs in the current user context, and this allows the developer to be freed from switching accounts many times during the develop/deploy/test phase.