Overclocking in simple terms is pushing your hardware past the default setting. Yes it can improve gaming but as I have myself just learned once you get over a certain speed ( 4 ghz ish ) I do not believe it makes much impact.
overclocking isn't to be taken lightly you need to know the limit of your hardware and be sure to watch out for over-volting and hardware temps.
I am sure somebody else will reply with a much better answer but this is the best way I could explain it to somebody new.
Hope it helps.
Also a good cooling solution is needed for overclocking and most people won't recommend it unless you have adequate cooling and in 90% of people's eyes you shouldn't do it on stock cooling and should purchase a named branded one instead.
Here's how Wikipedia describes overclocking
"Overclocking is the process of making a computer or component operate faster than the clock frequency specified by the manufacturer by modifying system parameters. One of the most important techniques is running at a higher clock rate (more clock cycles per second; hence the name "overclocking"), but other parameters, such as CPU multiplier and memory timings, can also be changed and would be considered to be overclocking. Operating voltages may also be changed (increased), which can increase the speed at which operation remains stable. Most overclocking techniques increase power consumption, generating more heat, which must be dispersed if the chip is to remain operational."
There's more, found here http://en.wikipedia.org/wiki/Overclocking