AKA Litterfall and Plant litter
Leaf litter is a general term for leaves and other light debris that cover the ground in woodlands and other sub-arboreal settings. Leaf litter begins with fallen leaves and generally evolves into soil litter, leaf mold, and humus. Leaf litter is considered part of the O horizon of soil.
Leaf litter takes a long time to compost, generally from one to three years. Because of this, most forests have a permanent layer of leaf litter over the ground. Numerous bacteria, fungi, and arthropod species live in the litter and help transform it into humus. These animals are known as saprobionts and detritivores, and provide a basis for many woodland food chains. The litter also provides home for various amphibians (salamanders and toads), reptiles (small snakes and lizards), mollusks (snails and slugs), and small mammals (voles and mice).
Having a healthy layer of leaf litter will help support healthy populations of birds and small scavenging animals, and through extension, larger predatory animals. It also keeps new, healthy soil on the ground. While leaf litter and the resulting soils are not the most nutrient-rich, they do have an important dose of nitrogen and phosphorus, tend to hold water well, and be well aerated by fungi mycelia and happy tunneling animals.
Many gardeners will collect leaf litter to compost, although due to the slowness of decomposition special modifications may need to be made to the compost pile. Mixing leaves with kitchen waste at a 50/50 ratio works well, but most people have many more leaves than coffee grounds, so gardeners may also use any of a number of strategies to improve the compostability of leaves. Many make a special effort to get leaves into the compost pile immediately as they fall off the tree, before they turn dry and brown. This results in quicker and more complete breakdown. If you are stuck with dry leaves, shredding (or otherwise mangling them; many people simply run the leaf pile over with a lawnmower a couple of times) will speed up decomposition, as will keeping them wet, mixing them with compost tea and grass clippings. Be warned, adding leaves to your soils will generally increase the acidity of the soil. This is easy to fix as long as you monitor your soil pH.
Some gardeners will also keep leaf litter on or around gardens for various ecological reasons. Leaf litter can act as mulch to keep weeds from growing and insulate the soil, and provide habitats for spiders, ladybugs, salamanders, toads, and other predators of pest insects. This litter can be raked up after sitting on the ground for a year and be ready to compost, or be left to rot where it falls. Either way, this saves time and is more energy efficient than bagging up the leaves for city pickup.
This site has some good tips on composting leaf litter.