OBD stands for On-Board Diagnostics. OBD-II (OBD two) is the latest industry standard, introduced in 1996 vehicle models. It monitors nearly all engine controls, as well as some other vehicle components (chassis, body, etc.).
The most useful aspect of OBD for most drivers is the ability to read vehicle information. You can read fault codes and even monitor real-time statistics such as RPM, vehicle speed, etc.