A line in config.sys that tells MS-DOS to use a different command shell. It doesn't even have to be a command shell, however. In theory you could set it to "C:\doom\doom.exe" (not that i've done anything like that...)
Usually, people would use it to set different parameters (like a larger environment space) or another path to command.com, like so: set COMSPEC=C:\windows\command.com /e:2048
With the advent of Windows 2k/XP, COMSPEC has become useless.