Think of a VPN as a 'tunnel' between two networks:
We'll use the example of Microsoft. Microsoft has a super-hardened corporate intranet for all sorts of important stuff like antitrust lawsuits and linux joke mailing lists that they sure don't want getting out. So everybody in Microsoft HQ in Redmond is directly plugged into the intranet and they don't have to worry about who might intercept the data since it's all on their ethernet.
Now let's say that there's a lawyer for Microsoft that's in Washington, D.C. defending an antitrust lawsuit. He needs an important document off the corporate intranet. The problem here is that the only way that he can connect to Microsoft is over the public Internet where *lots* of people could intercept the data and use it against the company. He need a secure way to get into the intranet and get the documents without having to be physically tethered to the Microsoft Intranet. The solution? VPN, silly!
A Virtual Private Network consists of, usually, some type of hardware box sitting at the corporate offices and clients outside the network all around the world. When a person connects to a VPN server they login and everything they send to the corporate VPN server is hyper-encrypted over a tunnel between the two hosts. If anybody was sniffing the network all they'd see is an encrypted session and they couldn't break into it (save for having a quantum computer....NSA? You listening?)
With the tunnel setup Microsoft can rest safe knowing that, not only is it really Bob from legal VPN'ing in but also everything that gets sent to him is totally secure.
You could use it at SM to connect two boxes securely that were in totally different cabinets but a better solution would usually be buying a switch or crossover cable and just physically connecting the machines.
Check out this HowStuffWorks article for more info. IT could prove me wrong on a few points too!
http://computer.howstuffworks.com/vpn.htm