you can go through this link and you will get some idea about 301 redirect http://www.webconfs.com/how-to-redirect-a-webpage.php http://www.google.com/support/webmasters/bin/answer.py?hl=en&answer=93633
It's a url redirect. When you have a site that has yourdomain.com/index.html you split your traffic between that and yourdomain.com, at least in search engine's eyes you do. You can use a redirect to decide which one you prefer, and ensure that all your traffic ends up on the same url, strengthening how search engines view your site for that particular page.
When a browser or crawler requests a URL from your site, the server renders HTML and returns it to the browser/crawler typically with a 200 Ok HTTP status code. If the browser or crawler requests a page that has been moved the server will typically return a 301 Permanently Moved or 302 Temporarily Moved status along with a new Location for that page. When the browser or crawler gets back a 301 or 302 HTTP status code, they request the new Location. From a search engine perspective, a 301 redirect tells the crawler that the page previously located at that URL has permanently moved. So the search engine will transfer credit for all inbound links to the old URL over to the new URL (new Location). At Google a 301 redirect will also cause them to drop the old URL from their index and replace it with the new URL. So if you have an old URL that has 100 inbound links and you rename the page to something else but FAIL to 301 redirect requests for the old URL to the new URL then your new URL is starting from scratch building inbound links. The new URL will NOT get credit for the 100 inbound links to the old URL. You will likely lose all rankings that the old URL had since all requests for that old page will now result in a 404 error which eventually will cause the page to be dropped from the index. It also means that 100 sites that linked to the old URL now have broken links to your site. Not a good user experience. However, if you have an old URL that has 100 inbound links and you rename the page to something else and DO implement a 301 redirect to the new URL then your new URL will get credit for the 100 inbound links to the old URL once the search engines recrawl all 100 inbound links. All links to the old URL will still be good since they will automatically get redirected to the page's new location so it's a much better user experience. And your new URL should start ranking for the same keyword phrases (assuming the content of the page did not change) as the old URL once the 100 links are all recrawled.
If you move your site or domain to new domain address, the value of all old domain will be lost if you don't do 301 redirection.