What is it?
A set of digital instructions that makes it easier to manage the increasingly large amounts of data found on farms of inexpensive disk drives. At its simplest, it's an administrative technique for dividing a disk or an array of disks into clearly defined chunks of storage space that can be assigned to one or more servers each. The phrase itself is rarely used, however, because it's so integral to other storage-management schemes; usually you'll hear about "storage consolidation" instead.
Why should I care?
Because storage capacity is increasing faster than the ability to manage it. Without partitioning, you can forget managing your data library efficiently.
What do you mean by 'consolidation'?
Companies consolidate storage to get rid of the little pools of disk space attached to each server. While it's good to have storage for each machine, it's not always easy to predict the amount of disk space each will need. A server in Finance, for example, might connect to a drive with 150 gigabytes of disk space, but only take up 100GB with its data. Managers in Operations, however, might be asking for 50 gigabytes of additional space after maxing out the 200-gigabyte disk in their own server. It's very hard, however, to give Operations access to Finance's excess capacity, so the company ends up buying an additional 50GB for Operations, while still not using the 50GB of empty disk in Finance.
How does it work?
In consolidating, companies throw out storage attached to individual servers in favor of big honking arrays accessible to all the servers. That big pool of storage space can then be divided, by the operating software in the arrays, into chunks that can be assigned to each server. When a server needs more space, administrators can expand its chunk by changing the numbers in a configuration screen, without physically touching either the array or the server. 
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