The Bootloader is the tool that loads the system software on the device and determines the priority for processes that run on the phone. The Bootloader is locked on new phones, to prevent this tool from being damaged by unauthorized use or modification. However, a Bootloader unlock can be used to unlock this tool, to access special system functions.
Unlocking the Bootloader allows you to install custom firmware on your Android phone and gives you full access privileges to make modifications to the phone. Such modifications could involve changing some of the pre-loaded software, or could even include replacing the entire operating system. Some developers and enthusiasts unlock and root in order to experiment with applications or with custom builds of Android.
NOTE: Unlocking the Bootloader is unnecessary for the majority of users, and is not recommended.