For those who don't know: Geocaching is treasure hunting with a GPS.
Somebody sets up a cache somewhere in the world. It might be a coffee can, or a plastic box. They place in it a log book, for people to write that they were there, and a handful of little trinkets. Might be little toys, or erasers, or just about any little thing you can buy at the dollar store. Then, they go to a site like geocaching.com and post that they set up the cache. They post the co-ordinates and a description. Then, other people visit the site, search so caches near them, get the co-ordinates, and hunt them down. When they find it, they sign the log book, then they might trade a trinket they brought with them for one in the cache.
I set up one micro-cache, which just has a roll of paper and two short pencils. It's basic'ly just a way to get people to visit the scenic view where I set it up.