NFC is a Near Field Communication. A very low power radio that will interrogate nearby (within touching distance) devices.
There are number of uses. You can beam whatever to another phone. For example, if you have YouTube video playing, put another NFC equipped phone right next to yours and tap your screen. Same video will start playing on another phone. You can do it with web pages, contacts, etc.
You can also buy NFC tags and encode them with instructions. For example, glue one to your car dock. It will enable bluetooth, disable ringtone, wifi, run an app of your choice (or activity, which is essentially a function in an app. Think "Run Pandora, and tune to my favorite mix right away" kind of thing).
Possibilities are limitless.
Just to add, below are some of the things we can do now and some are coming online soon. NFC equipped phones are the future.
Use your phone to pay for things with NfC. Pay for gas with NFC. Use NFC as your hotel card reader, instead of a card. Start your car with NFC. Use NFC instead of a swipe badge in a secure building. Use NFC tags in your house,mso when someone visits,mthey tap the tag and their phone is now automatically linked with your network. No setup required by the user.