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DKP = Dragon Kill Points, basically, points used to buy raid epics. 3nodding

http://www.rocktamusprime.net/rockdkp/listmembers.php

The distribution methods really vary from guild to guild, so I strongly recommend asking a friendly guidbie, or asking someone to put together a DKP FAQ just for your guild. A lot of guilds modify a basic DKP system to suit their individual needs.

DKP, like Kim said, is pretty much an inhouse currency for items that drop during raids. Points are usually earned by attending raids, killing certain mobs during a raid, and getting to the raid on time, but that can change in different DKP systems. If you have enough points, you can "buy" the loot item when it drops.

Some guilds also use a bidding system that accomplishes the same goal.

http://www.wowwiki.com/Dragon_Kill_Points
^ This is a pretty good overview and explains everything better.

DKP is also sometimes used to describe RPP (Raid Participation Points) systems, which are pretty similar.
http://www.curse-gaming.com/en/wow/article-101-1-a-guide-to-rpp-explanation-examples-and-summary.html

http://www.relentlesswow.com/rpp/viewnews.php
Here's what my guild is using.

At first, when our guild started raided, I had no clue what DKP was. My main was level 30, so I didn't care. Now I do. And the other day I used my points to pwn other priests to get 2/8 Prophecy in one night.

Basically, they are points you get for attending raids. If you are in a raid with your guild on a consistent basis, you get more points. These points come one of three basic ways: killing mobs (and bosses), or by attending the raid and getting a flat amount, or by what drops. (The last of those three is the hardest to figure out, but it's what people usually use - at least on my server.) For attending my guild's Molten Core runs (there are two, for time constraints), I can get about 40 points.

Now, onto the spending of DKP. It's not like every guild runs into a raid situation and just /roll 500 for loot. That's not fair to the people who are in every week and the newbie takes the loot. Usually, the more DKP you have, the higher on the priority list you are for an item. Epics, in most cases, cost 40DKP. (At least in the raids I attend, this is the case.)

Keeping track of DKP...its fun. There's a nice little web-based thing called EQDKP, but it takes up a database and kind of gets annoying sometimes. Other people just use a forum to keep track of this, but that can get annoying at times. I say, everytime that points are posted, copy the darn thing onto notepad and save them to your harddrive. Or screenshot them. This is to prevent a bad raid leader for screwing you over.

Overall, Leana Anita gave a good link there with the wowwiki. Never run a raid without checking wowwiki, I always say. Heh, for good laugh, check out my boyfriend's mage's points SWAT DKP. He's Tinkerspring. That's just sad. Very very sad. This is what happens when you get epic'ed out.

Dkp is like money you earn from working.
-Earn Dkp by doing raids.
-Save up Dkp to spend on items
Guild have different systems but that how dkp usually goes.