This refers to the number of 'dots' that will be printed in an inch (i.e. the quality of an image). For best resultings, print files should always be prepared at 300 dpi. Be careful when using graphics from the web, as they are usually much lower quality (72 dpi).

If you are using Photoshop to create your artwork, it is imperative that you select the correct resolution before beginning the design.

When creating a new document, you will be directed to the “New Document” window. Be sure to set the file to the correct size, and set the resolution at 300 pixels/inch.

If you are using Indesign, Illustrator or Quark, and importing images into your layout, it is important to ensure that the images are of high enough resolution at the size you are using them. To check the resolution of an image, open it into Photoshop and select Image > Image Size. You will then be directed to the image size window, where the information you require will be displayed.
 

Additional Resources
Wikipedia: DPI