Lapping the heatsink flattens its base (primarily) and smooths its base (secondarily), so that it doesn't take as thick of a layer of thermal grease to bridge the microgap between the CPU and the heatsink. The thinner the layer of thermal grease, the better the heat transfer across the layer of thermal grease and the less temperature difference will be required to drive X amount of wattage across it.
edit: if you meant "how is it done," the usual method is to lay wet/dry sandpaper on glass, put some water on it, and gently swirl the heatsink around in a figure-8 pattern, progressing from maybe 400-grit up to 1500-grit.