Can someone please tell me what it is, i see it on forums all the time but have no clue of what it is?
In most 3d games, each vertex is "painted" a colour between white and black to "light" the object. If you have a sphere with the sky above it, the vertices on the top will be white, whereas the ones underneath may be a dark blue or gray.
Usually the colour of the vertices is calculated and changed in realtime (characters from Quake, UT or Soul calibur). But there can be coloured before they reach the game engine; you can paint them in a 3d program, or even apply complex lighting (radiosity).
HOW these vertex colours are used is where the issue gets tricky. But its fair to say that vertex colours are an incredibly cheap way of faking nicer lighting, different coloured textures or even simply applying transparency to geometry.
cheers
It petty much is painting on a mesh in the view port in 3D. It is very helpful for many things, and helps many tools work easier and faster, Which Maya has been using for some time and max is starting to use more.