Something often found in a university, it's the chance at the end of a semester for students to evaluate a teacher's work. It's sort of like grading in reverse; this is normally the only chance a student has to let the teacher know how his or her performance has been, whereas the instructor is constantly evaluating the students. Teacher evaluations are usually anonymous, so the teacher (in theory) will never know who said what, allowing students to speak freely.
Because most students are too busy, timid, or otherwise limited in their ability to talk to a teacher directly about how the class is going, evaluations can be a great tool for teachers to know how certain aspects of their class are working for their students. If, for instance, a particular assignment or group of assignments were ineffective learning tools, the teacher could modify his or her class accordingly. On the other hand, if something was well received by the class, the teacher would know that sort of instruction is sound.
Unfortunately, there is a bad side to these evaluations as well. Students know that the administration will use these anonymous evaluations to make judgements on their faculty, and many students who are bitter with teachers--often because of something that is their own fault--will use teacher evaluations as a means to get revenge. Also, students seldom like to work hard, and will usually complain about a heavy workload. This often leads to the administration pressuring a wonderful instructor to "lighten up" on students when he or she is merely teaching the material that must be taught in an academically rigorous class.