Permalinks are the permanent URLs to your individual weblog posts, as well as categories and other lists of weblog postings. A permalink is what another weblogger will use to link to your article (or section), or how you might send a link to your story in an e-mail message. The URL to each post should be permanent, and never change — hence permalink.

In WordPress, permarlinks is look like this http://www.limfy.com/2009/02/using-wordpress-permarlinks. Notice the yellow colour is the topic of the post. By using this kind of URL, it is easier to recognize what is it pointing to.

By default, WordPress topic post link was like this http://www.limfy.com/?p=3. The link has no meaning at all and user will not know what is p=3. Confusing huh? Below is the screenshot of my site in google search engine:

There are many different types of Permarlinks format available and can change it at anytime. The options are in the Settings > Permarlinks.

For who has their own domain and hosting server

1. Make sure the .htaccess was accessible and placed on the root folder of web folder
2. If there is no .htaccess in the web server, create a file in the local computer with the name 1.htaccess and copy the htaccess code from WordPress under Settings > Permarlinks
3. If you are using FTP manager to upload, make sure the filename was 1.htacess. Once it is uploaded to the server, renamed it back to .htacess

Once all the steps were done, all the links name will change automatically according to the settings. For more details information on how permarlinks work, you can go to WordPress Codex page.