An exchange rate is the value of one country's currency (or money) in relation to another currency. If you have to trade 1.5 U.S. dollars for every euro, that makes the exchange rate 1.5 USD to 1 EUR.
It's important to know the exchange rate when you travel between countries and need to exchange your money for another currency, whether that's yen, rupees, rubles, or Canadian dollars. It's also good to understand exchange rates when you're booking a hotel in a foreign country and trying to figure out what the price will be in dollars (or whichever currency you usually use). Exchange rates change constantly, based on a variety of factors.