Buffalo buffalo Buffalo buffalo buffalo buffalo Buffalo buffalo

The sentence is unpunctuated and uses three different readings of the word "buffalo". In order of their first use, these are
a. the city of Buffalo, New York, United States, which is used as a noun adjunct in the sentence and is followed by the animal;
n. the noun buffalo, an animal, in the plural (equivalent to "buffaloes" or "buffalos"), in order to avoid articles;
v. the verb "buffalo" meaning to bully, confuse, deceive, or intimidate.

The sentence uses a restrictive clause, so there are no commas, nor is there the word "which," as in, "Buffalo buffalo, which Buffalo buffalo buffalo, buffalo Buffalo buffalo." This clause is also a reduced relative clause, so the word that, which could appear between the second and third words of the sentence, is omitted.
Thus, the parsed sentence reads as a claim that bison who are intimidated or bullied by bison are themselves intimidating or bullying bison (at least in the city of Buffalo– implicitly, Buffalo, NY):
1. Buffalo buffalo (buffalo from Buffalo NY) [that] Buffalo buffalo buffalo (that the buffalo from Buffalo NY bully) buffalo Buffalo buffalo (are bullying buffalo from Buffalo NY)
2. [Those] buffalo(es) from Buffalo [that are intimidated by] buffalo(es) from Buffalo intimidate buffalo(es) from Buffalo.
3. Bison from Buffalo, New York, who are intimidated by other bison in their community, also happen to intimidate other bison in their community.
4. The buffalo from Buffalo who are buffaloed by buffalo from Buffalo, buffalo (verb) other buffalo from Buffalo.
5. Buffalo buffalo (main clause subject) [that] Buffalo buffalo (subordinate clause subject) buffalo (subordinate clause verb) buffalo (main clause verb) Buffalo buffalo (main clause direct object).

This excerpt is taken from the wikipedia entry.
http://en.wikipedia.org/wiki/Buffalo_buffalo_Buffalo_buffalo_buffalo_buffalo_Buffalo_buffalo