It allows you to work with several different items and programs at once, all in their own 'window'. A window is like a smaller screen contained within a box on your main screen.
When you are working with a window it is brought to the 'front' of the screen, overlapping the Desktop and any other items behind it, so that you can focus on whatever is in the window.
In this way, you can have several windows open at the same time containing different programs that can be opened, closed, and re-arranged across the screen. This means you can do multiple tasks at the same time, such as listening to an audio program while writing an e-mail for example.