The term LED is an abbreviation for Light Emitting Diode, and essentially describes a semi-conductor component that produces light when electricity is applied.
A LED is not like a traditional light bulb where electricity is used to heat/burn a filament wire until it glows. LEDs are efficient, producing significantly more light per watt than most other forms of lighting. The physical size of a LED is very small (typically less than 10mm) and due to this they are VERY versatile design-wise. These factors alone mean LED technology now provides the most commercially-viable, energy-efficient lighting solutions. For a somewhat exhaustive description of many facets of LED technology and history, please visit the Wikipedia pageLight Emitting Diodes.