Stands for "Parameter Random Access Memory," and is pronounced "P-ram." PRAM is a type of memory found in Macintosh computers that stores system settings. These settings include display settings (like screen resolution and color depth), the time zone setting, speaker volume, and the startup volume choice. The system settings that are stored in the computer's PRAM differ from Mac to Mac, but the purpose of the memory remains the same.
If your Macintosh is behaving erratically or is not booting up all the way, you may want to try resetting the PRAM. You can reset or "zap" the PRAM on a Mac by pressing and holding the Command, Option, P, and R keys right as you turn the computer on. Yes, there are four keys you need to hold down at the same time. Once your hear the startup chime a second time, the PRAM has been reset and you can release the keys.
Note that if you choose to zap your PRAM, you may need to set your display, time zone, startup volume, and other affected settings using System Preferences. Some firmware updates may reset your PRAM as part of their installation process, which means you will have to reset the affected settings after the installation.