According to Google, "a wave" is equal parts conversation and document. People can communicate and work together with richly formatted text, photos, videos, maps, and more.
Google Wave is not released to the public yet, but Google has sent out invitations to 100,000 people thus far to test it out prior to it becoming public. As Google Wave is rumored to be the next evolution in online communication, loads of people, mainly techies, are begging to get invites to test this new tool. Read WSJ's take on Google Wave.
In my opinion, Google Wave is more or less a mashup between MSN (Windows Live) messenger, email, Facebook and Twitter. If it is received well, we might see the early demise of Facebook and Twitter.