mod_rewrite is an extension module of the Apache web server software which allows for "rewriting" of URLs on-the-fly. Rewrite rules use regular expressions to parse the requested URL from the client, translate it into a different URL, and serve the content of this new URL under the original URL or pointing the client to make the new URL request.

WordPress uses mod_rewrite for its permalink structure, and also for multisite networks, which are both optional functionality.

Reference http://codex.wordpress.org/Glossary