DesktopLyrics is an application that displays the lyrics of the song currently playing in "iTunes" right on your desktop. The lyrics for the song have to be set in iTunes; DesktopLyrics does nothing to fetch them if they aren't available in iTunes. If you don't want to type-in all your lyrics manually you can use an application like "Harmonic", "GimmieSomeTune", or "Get Lyrical".
Note: As of version 2.0.0, DesktopLyrics is no longer free and costs $3.99. A 'Lite', unsupported version of the app is available here.
Note: The demo version is currently at 2.6.6. The version available for purchase on the Mac App Store is 2.6.5.