Terroir is a very important concept in winemaking. Terrior is how the combination of climate, weather, soil, and topography come together to make a wine different from other wines. Basically, terroir is how all the natural aspects come together to make a wine what it is.
Terroir is much more important as a concept in places like France, where the winemakers know their land and climate very well. This is part of why French labeling is so confusing. Rather than labeling wines varietally, like in California, wines are labeled based on where they are from, which is an indication of the terroir involved in making the wine. If winemaking is done right, subtle aspects of a vineyard, such as the differing sloped or hilled areas, will be represented in the wine, and give that wine its own regional flavor. The wine that is grown on the slope will probably cost a little bit more, and be a little bit more complex than the wine that grows in a flat surface, and French winemakers have had a long time to figure out which areas of their vineyard produce those more complex wines.