Kerning is the space between letter pairs. When you set type in any pro-grade graphics program (like Photoshop, Fireworks, etc.), you have the ability to alter the space between letter pairs, making minute adjustments until your type looks just right.
What's that you say? "It looks fine without adjustments of the space between letter pairs?" Put down those pork rinds and pay close attention Cletus...I'm going to enlighten you.
Proper kerning is, in my opinion, the single biggest thing -- and the first thing I notice, that separates the work of professional designers from that of 'apprentice' or 'wanna-be' designers.
The amount of empty space between letter pairs 'wants' to be equal, and that's the goal of hand kerning your type.