Activation Lock is a new feature introduced in iOS 7 and it adds an additional layer of security to some of Apple’s other security features, such passcode lock and Find My iPhone. Basically what it does is that in order for a thief to wipe the phone and resell it, they’ll have to enter the phone’s Apple ID and password to do so, which presumably they would not know. This would prevent them from wiping the device which could discourage people from selling or purchasing it on the black market.
Of course we expect that eventually someone will come up with a way to get around the feature, and as it stands there are a couple of teething problems with the software, but hopefully those kinks get sorted out soon.