The premise behind region coding is fairly straight-forward. With DVD region coding, the world is divided into eight regions (Canada and the U.S. form Region One). Consumer electronics manufacturers have agreed to respect region coding within their products by ensuring that DVD players only play DVDs from a single region. The net effect is that Canadian-purchased DVDs will play on Canadian-bought DVD players, but DVDs purchased in Europe, Australia, or Asia (all different regions), are unlikely to work on those same DVD players (with the exception of those DVDs that are region coded zero, which can be played worldwide). The is also true for playing the DVDs on a personal computer – my Macintosh will only allow a limited number of region changes.
Note that the use of region coding has nothing to do with traditional notions of copyright law. The underlying work may involve a copyrighted work – DVDs and video games regularly use region coding – yet the protection is designed to manipute markets by restricting the ability to use fully authorized copies of works.