Its where you go to a qualified plastic surgeon (if he/she isn't qualified, you go there to die...) to basically have pockets of fat cells sucked out. There is a legal limit to how much stuff you can have sucked out at one time (like 6 lb or something) and, interestingly, also the number & types of surgeries you can have at the same time - e.g. women will go in for a boob job & a nose job in the same surgery session. I think you can't do a boob job & lipo because its just too much trauma to the body at one time or something like that.
Anyway - it sucks out fat cells. You don't just instantly get skinny but if you have an area that you just want taken care of, that is one way to do it. But the catch is that, just like w/ crash diets and every other extreme or focused effort to make a drastic change in your body, it can't be maintained if you dont' change your lifestyle to support that change. I.e. you can go get lipo, but if you don't change the eating habits that got you to that shape, you'll gain the fat back - but since you now have a different distribution of fat cells, you may find yourself gaining the fat back in new areas where you never gained weight before.