It's basically a compressed file but most often associated with illegal downloads in my mind. Such as off of p2p prgrams but here you go. http://www.rarlab.com/rar_file.htm all you want to know. I googled that and found it in like 30 seconds. hint hint.
RAR is the native format of WinRAR archiver. Like other archives, RAR files are data containers, they store one or several files in the compressed form. After you downloaded RAR file from Internet, you need to unpack its contents in order to use it.
RAR is much better than zip. Slower, maybe, and not integrated with Windows like zip is, but for some file types, the compression factor can be quite dramatic. You can even see a pretty chart of the compression in the properties screen. Get WinRAR and enjoy.