A permalink is a URL at which a resource or article will be permanently stored. Many pages driven by Content Management Systems contain excerpts of content which is frequently rotated, making linking to bits of information within them a game of chance. Permalinks allow users to bookmark full articles at a URL they know will never change, and will always present the same content.

Permalinks are optional in WordPress, but are highly recommended as they greatly increase the cleanliness of URL. WordPress uses the Apache module mod_rewrite to implement its permalink system.

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