Curation is an act of organizing information so that it appeals to a wider range of potential viewers. It often involves elevating and promoting content into new streams that highlight particular topics or areas of interest. As Cory notes, it's a kind of expert filtering that helps differentiate wheat from chaff.
It essentially allows one to create horizontal slices across the Internet, which is still too often vertically-oriented (organization-centric, limited topic areas, etc.). It also allows for the re-surfacing of content which might have disappeared from the current chronological stream.