Basically, it is another oscillator that oscilates at frequencies that are really too low to create any audible differences. Basically, they effect the frequency of the waveform, making it gently rise up and down at a rate relative to the speed of the LFO. They have the ability to give a sound a little more depth if used correctly. At the other end of the scale, they can create some seriously significant changes in the pitch.

Some synths will allow you to assign an LFO to another function. For example, you can assign an LFO to a LP filter so that as the pitch of the LFO rises, the filter opens and as the pitch falls, the filter closes up, or vice versa. They can be assigned to many other patametres as well, it just all depends on the synth you are using.

___________________
1 out of every 4 people in this country are mentally disturbed. Look at your 3 closest friends. If they seem okay, then you're the one.

Well, nice try hey cheggy, but I got a bit confused

An LFO is an oscillator that (almost always) operates at a frequency below the threshold of human hearing (hence the "Low Frequency" part of the name).

What's the point of an oscillator you can't hear? Well, because rather than being used to generate audio for inclusion in the output audio signal, an LFO is used to affect parts of the synthesis process (as hey cheggy rightly demonstrates).

Most synths (depending on how complex they are) allow you to assign the LFO as a modulator for something else on the synth (e.g. the pitch of a main oscillator, the cutoff frequency of the filter etc.)

Some examples of how LFOs can be employed to recreate effects Classical musicians have been using for centuries are:
Vibrato - Modulate the main pitch with an LFO so that the pitch rises and falls just a small amount (less than a semi-tone) a few times a second
Tremelo - Modulate the main volume with an LFO so that the volume fades in an out a small amount