ESRI posted a FAQ
about ArcGIS Explorer. It provides information on system requirements, data types supported, and customization details. For instance, the FAQ states that the software will be less than 20MB and work with Windows 2000/XP. Also, the following local data types can be used within ArcGIS Explorer: ESRI Shapefiles, File Geodatabases, JPEG 2000, GeoTIFF, IMG, KML, and KMZ.