Multi-room is the distribution of music, video (or both) and digital media throughout the different areas in you home. A very broad outline of the options are:
1) Having the same music playing throughout the home, with each area (zone) having its own volume control.
2) Having different music playing in different zones of the house (i.e. jazz in the kitchen, classical in the study and Hip-Hop in the kid's bedroom). Again each zone will have its own volume control.
3) Having different music playing throughout the house as above, but giving each zone total and independent control over the system. i.e. if you are in the kitchen you can switch between radio stations or skip tracks on the CD player or iPod without disturbing someone who is using the system to watch videos in the family room. This can be done via keypads on the wall or a roaming remote control.
4) Any of the above, with the added luxury of distributing your video signals (Pay-TV, Blu-ray etc) throughout the house.