Bluetooth is a wireless technology that operates on the 2.4Ghz range, and offers a medium for universal connectivity between devices on a standardized protocal.
http://www.bluetooth.com/tech/works.asp
For instance, you can be walking around with your PocketPC, and be able to sync your PDA with your desktop computer while the PDA is still in your pocket. You can use bluetooth to establish a network connection, like connecting your PDA to the Internet via your desktop using bluetooth... and its all wireless.
Its also extreamly widely used with cell phones. Plantronics has a nice little headset that just rests on your ear... no wires, not headband, no huge device... just this simple little thing that sits on your ear and you can talk to someone on your cell phone while the phone is still in your pocket.
http://www.plantronics.com/north_ame...eId=cat2420494
Microsoft now has a keyboard and mouse that use bluetooth for wireless communication with your computer, and if you have bluetooth built into a laptop that means you'd be able to use the keyboard/mouse without any adapters... just pull the mouse out and the laptop out and everything is happening. You wouldn't have to plug in something into USB or anything crazy like that where you have something sticking out of your laptop.
And because it operates on the 2.4Ghz frequencies, you get some pretty good distance out of the devices too.