A Ramdisk is a portion of memory that you allocate to use as a partition. Or, in other words, you are taking memory, pretending to treat it as a hard drive, and you are saving your files to it.
Why would you want to use a RamDisk
Well, if you know that certain files you have are constantly going to be used, putting the files into memory will increase the performance of your computer since your memory is faster than your hard drive. Things like web servers with lots of data can be sped up this way.
Or, if you are insane, and you have a PII 550 Mhz computer with 1GB of memory and an old 500MB hard drive, you can use it just to increase your hard drive space. Then again, if you want an almost diskless machine, it might not be that crazy afterall.