What is sharding and why is it important?

I think I understand sharding to be putting back your sliced up data (the shards) into an easy to deal with aggregate that makes sense in the context. Is this correct?

Update: I guess I am struggling here. In my opinion the application tier should have no business determining where data should be stored. At best it should be shard client of some sort. Both responses answered the what but not the why is it important aspect. What implications does it have outside of the obvious performance gains? Are these gains sufficient to offset the MVC violation? Is sharding mostly important in very large scale applications or does it apply to smaller scale ones?

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