Recycling waste water doesn't sound too appetizing, but we're not talking about toilet waste. And we're not thinking of reusing it for washing/drinking!
Gray water is simply drain water from everything EXCEPT toilets (sinks, showers/tubs, washing machines, etc.) Okay, but if you're not drinking or washing with it, what can you do? The green solution is to use it for toilet flushing!
Think about it - each flush is 1.6 gallons of water (or just under a gallon for dual flush). Unless you are actively conserving by NOT flushing, this would be in the range of 4-6 gallons a day per person (or more, depending on your habits), in the range of about 10% of daily use. Anything done to supplement the water supply for flushing will reduce the overall demand for treated water.
An estimate for the Green Home Builders of the Triangle Education Committee indicates that a Durham family of 4 could save 12,000 gallons a year.