After you create a website, it needs promotion. It needs to be seen by the search engines like Google and Bing so that your customers are able to find it.
SEO is the practice of improving the visibility of a website in the search engines. This is done to increase traffic and grow your site. Without traffic to your site, it would be useless. There are many ways to get your site ranked in the search engine using white hat techniques such as Keywords analysis, H1, Title Tags, Backlinks and more. Sometimes SEO is just making sure your site is structured well for the search engines.
SEO is about making sure your site is people friendly too, not just search engines. Your site should be well designed and suited for the user. It needs to be easy to navigate.
For more information on what is seo, check out this Moz guide.
Google also has guidelines that provide webmasters with tips to make their sites easier to crawl for google bots.