A Memo is generally a short sentence written down to help your memory or to leave a message to a person in same office/organization. In the context of the Steem blockchain, a memo can be attached to a transfer of funds from one account to another.
It is often used to transfer funds to an exchange or to track the reason what certain funds have been used for. But another use of Memos is to send encrypted messages. Memo keys are required for that purpose.