Damage control is a reactive measure of dealing a particular issue or problem, when said issue or problem is, or is appearing to be, unavoidable. The idea is that if a disaster is about to happen, the best you can do is to reduce the fall-out, by limiting the impact of the problem.
The phrase 'damage control' is used in many different fields, including the war on drugs ("we can't stop it, but we can try to help people who have fallen prey to drugs"), natural disasters ("we can't stop the tornado, but we can evacuate people"), accidents ("I couldn't stop from crashing my car, but the airbag and seat belt prevented me from death") and in public relations ("The British prince didn't really mean that you'll go all slitty-eyed if you stay in Japan for too long" - ref Prince Philip).
Damage control is often seen as an absolutely last resort, as it isn't as much a solution to a problem as a (partial) solution to the symptoms of a problem.
Damage control (also sometimes known as fallout management, damage reduction, or damage management) is only as good as its preparations: Good emergency procedures and emergency planning are paramount to a successful damage control exercise. To go back to our car accident example: If your car doesn't have an air-bag, trying to fit one as you realise you are going to crash is not going to do any good.
Damage control is also the title of a role on a battleship in action - whenever a ship gets hit by shells, bombs or torpedos, the damage control team try to take action to prevent the ship from sinking.
Due to damage control in the form of spin by spin doctors in the field of public relations, "damage control" has - perhaps unfairly - taken on a negative connotation.
Despite being a thankless task, governments are expected to have plans in place to reduce damage in case of, say, a terrorist attack. There is a whole industry which deals with disaster recovery, including planning, modeling of disaster scenarios, etc.
Failure to prepare for such disasters (think hurricane Katrina, the malfunctioning levees, and the paltry response of the US government in the aftermath of the disaster) can cause significant lack-of-faith issues in a current administration.
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