Overclocking is, to put it succinctly, increasing the frequency (or clock-rate) of your hardware. Usually the CPU and GPU, but also the RAM, and parts of the motherboard.
This can be done through software, since they are programed to interact with the BIOS, but the best way is to interact with the BIOS yourself. You can generally achieve a higher overclock, with less voltage, if you do it yourself.