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Hi MitaDC,
It's updating the firmware on your video card or motherboard (or other device) using software (so you don't have to physically put in a new chip). If the device supports this feature, and most motherboards and modern video cards do, it allows you to update the device to improve performance, stability and/or compatability.
Some people also use it in an attempt to upgrade the device to another device that is physically similar or identical. For example: Some of the original 9500 cards had almost identical hardware to 9700pro cards ... many people were able to flash the cards bios to make the card think it was a 9700pro (which increased memory bandwidth and pixel pipes). Some people soon realised that the extra pipes were faulty or had other difficulties and had to flash back. But many also increased the performance of their cards considerably.
There are dangers in flashing a bios as, if it stuffs up, it is difficult to fix. There are even more dangers flashing a device to think it is another device ... you really need to know what you are doing.
Some devices, like modern Gigabyte motherboards, have dual bioses to safeguard against misflashes.
Hope that helps,
Elad.
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