It basically allows the cpu and/or memory controller (AMD memory controller is in the cpu, Intel is on an external northbridge) to address two different memory banks at one time rather than one at a time thus doubling your memory performance (of course in real world applications this is hardly the case) The AMD64 gets about a 5% boost in performance from "dual channel" over single channel but more recent benchmarks that stress the memory subsystem I have seen higher boosts. The P4 gets a greater boost from dual channel due to it needing higher bandwidth.
You have to have two dimms (preferably the exact same model and frequency) for dual channel to work obviously. This is a drawback for some people because it can cost more money. One dimm for can be used in a dual channel setup but there will be a big performance penalty (especially on the P4)