When interpreted convservatively, the von Neumann-Morgenstern rationality axioms and utility theorem are an indispensible tool for the normative study of rationality, deserving of many thought experiments and attentive decision theory.  It's one more reason I'm glad to be born after the 1940s. Yet there is apprehension about its validity, aside from merely confusing it with Bentham utilitarianism (as highlighted by Matt Simpson).  I want to describe not only what VNM utility is really meant for, but a contextual reinterpretation of its meaning, so that it may hopefully be used more frequently, confidently, and appropriately.

1. Preliminary discussion and precautions
2. Sharing decision utility is sharing power, not welfare
3. Contextual Strength (CS) of preferences, and VNM-preference as "strong" preference
4. Hausner (lexicographic) decision utility
5. The independence axiom isn't bad either
6. Application to earlier LessWrong discussions of utility

1.  Preliminary discussion and precautions

The idea of John von Neumann and Oskar Mogernstern is that, if you behave a certain way, then it turns out you're maximizing the expected value of a particular function.  Very cool!  And their description of "a certain way" is very compelling: a list of four, reasonable-seeming axioms.  If you haven't already, check out the Von Neumann-Morgenstern utility theorem, a mathematical result which makes their claim rigorous, and true.

VNM utility is a decision utility, in that it aims to characterize the decision-making of a rational agent.  One great feature is that it implicitly accounts for risk aversion: not risking $100 for a 10% chance to win $1000 and 90% chance to win $0 just means that for you, utility($100) > 10%utility($1000) + 90%utility($0). 

But as the Wikipedia article explains nicely, VNM utility is:

1. not designed to predict the behavior of "irrational" individuals (like real people in a real economy);
2. not designed to characterize well-being, but to characterize decisions;
3. not designed to measure the value of items, but the value of outcomes;
4. only defined up to a scalar multiple and additive constant (acting with utility function U(X) is the same as acting with a·U(X)+b, if a>0);
5. not designed to be added up or compared between a number of individuals;
6. not something that can be "sacrificed" in favor of others in a meaningful way.

[ETA]  Additionally, in the VNM theorem the probabilities are understood to be known to the agent as they are presented, and to come from a source of randomness whose outcomes are not significant to the agent.  Without these assumptions, its proof doesn't work.

Because of (4), one often considers marginal utilities of the form U(X)-U(Y), to cancel the ambiguity in the additive constant b.  This is totally legitimate, and faithful to the mathematical conception of VNM utility.

Because of (5), people often "normalize" VNM utility to eliminate ambiguity in both constants, so that utilities are unique numbers that can be added accross multiple agents.  One way is to declare that every person in some situation values $1 at 1 utilon (a fictional unit of measure of utility), and $0 at 0.  I think a more meaningful and applicable normalization is to fix mean and variance with respect to certain outcomes (next section).

Because of (6), characterizing the altruism of a VNM-rational agent by how he sacrifices his own VNM utility is the wrong approach.  Indeed, such a sacrifice is a contradiction.  Kahneman suggests¹, and I agree, that something else should be added or substracted to determine the total, comparative, or average well-being of individuals.  I'd call it "welfare", to avoid confusing it with VNM utility.  Kahneman calls it E-utility, for "experienced utility", a connotation I'll avoid.  Intuitively, this is certainly something you could sacrifice for others, or have more of compared to others.  True, a given person's VNM utility is likely highly correlated with her personal "welfare", but I wouldn't consider it an accurate approximation. 

So if not collective welfare, then what could cross-agent comparisons or sums of VNM utilities indicate?  Well, they're meant to characterize decisions, so one meaningful application is to collective decision-making: