A stream is an abstract interface implemented by various objects in Node. For example a request to an HTTP server is a stream, as is stdout. Streams are readable, writable, or both. All streams are instances of EventEmitter. (Streams Documentation)
This means a Stream is a useful object used by several Node core objects to read and/or write information. The core objects all use this to improve the way you can pipe information from one object to another. Since a Stream is an instance of an EventEmitter your code can be asynchronous and not stall while reading information from somewhere.
// imagine 'response' is the output Stream from a client connection
var video = fs.createReadStream("/path/to/video.mpg");
// pipe video to response (while data is being read asynchronously)
video.pipe(response);
Check stream.pipe.
For example, to stream a video to an HTTP client while reading it from a file. Or stream an upload to a local file. Use your imagination.