Aliases are short pieces of text that represent the title of certain items (Menu items, Articles and Categories) in a machine-friendly format. This format allows only lowercase letters and dashes (-).

Aliases are used by Joomla to make Search Engine Friendly URLs. There are technical limitations to the types of characters that can be included in URLs, so Joomla prevents problems with invalid characters by allowing you to specify an alias.

You can fill in an alias yourself. If you leave the alias field empty, Joomla will automatically create an alias from the Title field of an item when it is saved. This means that if you edit the title of an item, but you leave the old alias in its field, the alias (and the URL that is created from it) will not change. Empty the alias field if you want generate a new alias.

Reference: http://docs.joomla.org/Glossary