You run a soft grade pencil against the gears, and the graphite (pencil "lead") acts as a dry lubricant. Suposed to make the car quieter, maybe a bit faster, and cause it's dry it won't attract all kinds of dust and crud.
Hardware stores also have the graphite powder in little plastic tubes (for dry lubing door lock mechanisms). The stuff is rather messy (kinda like the stuff inside a laser printer cartridge) so be careful where you decide to apply it. You need something to rub it onto the gears, otherwise it will fly off when the car runs.
The first time I did this was with a HB pencil (but the softer types are better), when I first used graphite, I used my fingers (what a mess), next time I might try those little foam padded Q-tip things