Stands for "Graphics Processing Unit." Like the CPU (Central Processing Unit), it is a single-chip processor. However, the GPU is used primarily for computing 3D functions. This includes things such as lighting effects, object transformations, and 3D motion. Because these types of calculations are rather taxing on the CPU, the GPU can help the computer run more effienciently.
The first company to develop the GPU was NVidia, Inc. Its GeForce 256 GPU can process 10 million polygons per second and has over 22 million transistors. Compare that to the 9 million transistors found on the Pentium III chip. Wow -- that's a lot of processing power. There is also a workstation version of the chip called the Quadro, designed for CAD applications. This chip can process over 200 billion operations a second and deliver up to 17 million polygons per second. If only you could think that fast during those darn Calculus tests...