Myelin is used by many vertebrates and a few invertebrates to insulate the axons of nerve cells. The myelin cells physically wrap around the nerve axon, insulating it in the same way one insulates a wire. This allows the action potential to travel along the neuron about five times as fast as in an unmyelinated neuron.
These myelin cells are strung out along the axon like beads on a string (actually, they're elongated, so it's more like sausages on a string). They wrap around the axons 20-40 times, and then loose their cytoplasm, leaving a lipid-rich (made from fat) cell membrane. This helps to insulate the axons, allowing the electrical impulses to travel faster down narrower paths. (The famous giant squid axon has to be so big in order to make up for the fact that squids, and most other invertebrates, have no insulating myelin cells; for them a longer axon means a thicker axon).
In between these myelinating cells there are small (1 mm) gaps called nodes of ranvier. These are necessary for ions to cross into the axon and renew the action potentials (AKA 'nerve impulses') as a signal moves along the axon. The resulting series of pulses occurring in the nodes of ranvier is known as saltatory conduction.
Myelination starts before birth and continues for the first couple years of a child's life. The lack of completely formed myelin is part of the reason that young children have limited locomotor abilities.
Myelin cells come in two sorts: in the peripheral nervous system Schwann cells insulate the axons, while in the central nervous system (brain and spinal cord) myelin is produced by oligodendrocytes.
Multiple Sclerosis is caused when the immune system starts attacking the body's own myelin, causing a decrease in the efficiency of neuron transmission, and thus hampering locomotor and cognitive functions.
See: glial cells, Wallerian degeneration, neurotransmission.