In Final Fantasy VII, the Gold Saucer is a gigantic, multi-featured theme park towering high above the ground. The park is in the form of a gigantic gold spire pointing towards the sky, topped with a number of spires each topped by a golden, saucer shaped building. The gold saucer can only be reached by taking a gondola from the remains of Corel, or by taking the elevator from the desert prison at the base of the shaft.
The Gold Saucer offers a number of attractions: a ghost house hotel, a playhouse, an arcade full of video games, a battle arena, and of course, the famous Chocobo Races. Many of the attractions at the Gold Saucer can only be paid for with GP, a special type of currency that can only be won by spending gil, or real money, at the Chocobo Races or Wonder Square arcade.
Within the game, visits must be made to the Gold Saucer at several points, starting with the first trip halfway through the first disk when you pick up Cath Sith. Later on, the date with Aeris Gainsborough takes place there. Players can also go there to win prizes or breed Chocobos.
That being said, game play aside, the Golden Saucer is a great literary device. First off, the idea of a video game in which you actually go to an arcade and play video games is really weird, yet, as with many of the weird aspects of this game, makes more and more sense as it gets weirder. For example, one of the games in the arcade involves feeding nuts to a moogle so that he can grow wings, fly, and attract a mate. The games main villain, Sephiroth, is much later in the game described as a "one winged angel", a being whose goal of growing wings and flying to godhood provides the impulse for the story.
Why I think the Gold Saucer really is an important element of the world of Final Fantasy VII has to do with the underlying issues of environmentalism that the game developes. In the world of Final Fantasy VII, the very rich live in towers and skyscrapers that they build by the wealth and energy that they obtain by taking mako, or lifeforce out of the earth. The game portrays the upperclasses as being everything from evil to silly to ignorant, and the image of the gigantic golden playground, seperated from the ground, where the rich people waste away their time while ignoring the dying earth below them is a microcosm for what the game says about humanity as a whole.
For a game that often goes over top in its cosmic story line, the point of the gold saucer is made very subtly. It doesn't portray the rich patrons there as being extravagent, decadent people, but rather just normal people in the normal process of having fun. But their fun, like the fun of everybody else on the planet, comes at a great price.