A neutral density filter or ND filter is a grey tinted filter. This can be applied to the lens in a number of different ways.
Cokin P type – this type of filter slots into a cradle that can be bought seperately.
Circular, screw on;
A neutral density filter reduces light of wavelengths or colors equally (and therefore do not effect the colour of the finished photo) that enter the lens. The purpose of a neutral density filters is to allow the photographer greater flexibility to change the aperture or exposure time, allowing for more control, particularly in extreme circumstances.
When using this type of filter during the day the shutter speed can be reduced or a larger aperture used where normally the photo would be overexposed.
ND filters can be purchased at different ‘grades’ these signify the shade of the filter, from very slightly tinted to almost black in appearance (the higher the number the stronger the filter and the less light it allows through to the lens). Using these different grades allows you to choose the correct filter for the correct condition.
Further resources;
Neutral Density Filters: What are they & when to use them ?
Using a Neutral Density filter
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[...] Neutral Density Filters - When taking photographs using slow shutter speeds during the day or in light conditions a Neutral Density filter acts like a pair of sunglasses for the camera lens and helps to avoid overexposing the image. [...]
Please add that the ND2 filter will reduce the light for one stop, the ND4 for 2 f-stops and the ND8 for 3 stops.
Also the wikipedia page is very useful:
http://en.wikipedia.org/wiki/Neutral_density_filter