GEDCOM is the acronym for GEnealogy Data COMmunication, and was created by the Church of Jesus Christ of Latter-day Saints to allow genealogy data to be exchanged between different types of software. GEDCOM specifications consist of rules for encoding information such as name, dates, locations, relationships, and events. Currently, the latest version of GEDCOM is 5.5, but new standards are being worked on.
    Most genealogy programs store data in proprietary data forms which cannot be read by other programs. Which is fine if everyone used the same software, but they don't! If I wanted to share information from my Family Tree Maker program with a friend who used another genealogy program, I'd be out of luck unless both programs supported the import and export of data in GEDCOM format. Today, almost all of the programs available support GEDCOM, so you can share your data with just about everyone.
    Gedcom files are most useful if you want to share a particular line from your Family Tree Maker (or similar genealogy program) file with another researcher. To generate a GEDCOM file, you open the Family File which you wish to share, and use the Save As... command to tell Family Tree Maker to export the data in GEDCOM format. Some programs allow you to specify how information will appear in the GEDCOM file by choosing a particular version of GEDCOM, whether you wish notes included, and whether you wish tags to be abbreviated. Check your program to see what particular options you have when exporting a GEDCOM.
    Once the GEDCOM file is created, you can give it to your friend on a disk, or attach it to an e-mail. You can also view your GEDCOM using a word processor or text editor. Although a GEDCOM is nothing more than a text file, you should not alter it unless you are familiar with GEDCOM standards.
    Upon receiving your GEDCOM, your friend can import it into her genealogy program, and voila! A data exchange has taken place. With GEDCOM you can view others' research, incorporate it into your own file, print it out, merge it and add or subtract to it without having to type the data in by hand.
    As with any other data, you should treat information you receive via a GEDCOM as unvalidated until you prove it. It may be tempting to import someone else's research into your family and call it good, but you still have the burden of proof upon you; good research practices demand that you verify all of the information before accepting it.
 

Another useful link  - GEDCOM 101 by Jan McClintock