In terms of the wonderful world of GUI shells, this is an option that makes a window, icon, widget, or whatever show up above everything else, even if it's not selected or doesn't have focus. Handy for programs like winamp that you want to have easy access too. It comes up in all kinds of operating systems, with varying degrees of usefulness and implementation. The vast majority of users are unfamiliar with its joys, as there's basically nothing built in to the windows shell that supports it. Luckily, all is not lost, many applications, like the aforementioned winamp, have options built in that let them stay on top.
As you go deeper into the world of shell modding, versatile programs like windowblinds let you give windows the always on top functionality it's so sorely missing. Among other things, it lets you add a button to the titlebar, often shown as a little pin, that makes that window stay on top, as if you were pinning it to the desktop. For the truly crazed you can install litestep. At this point basically everything can be made always on top, from the smallest text label to the desktop itself. You just need a text editor to do it. A common approach used by many themers is to make some kind of taskbar that doesn't take up the entire length of the screen, and set everything on it to be always on top. This way you can have a maximized window taking up the whole screen, and still have the taskbar and all its functionality without wasting any screen real estate.
Litestep, or any other total shell replacement for windows, also introduces the concept of a vwm. This gives always on top a new dimension of meaning, as something can not only be made to stay on top of one desktop, but also to be on top of all the other virtual desktops at the same time. Those lucky enough to be using linux can set this sort of thing up easily enough through the myriad options of whatever window manager you're using. But getting tricks like this to work in windows is still something of a black art. Chances are we're not gonna see built in support for fancy things like this from Microsoft any time soon, as its a good deal beyond the capacity of the kinds of people usually using windows.