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It's a type of file sharing. Basically, a person who has a file they wish to share creates a torrent - a hash of the file in question - and sends it to a tracker. Users who are interested in the file then download the torrent file (normally only a few kilobytes in size) and the torrent points them to the tracker.
All users on the tracker trying to get the file try to download bits and pieces of the file, and share what they have downloaded back out. So if I download the first 5KB of the file and you download the second 5KB, then we can share amongst ourselves without causing the host to send those 10KB.
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