Toe is a measurement of the alignment of two wheels on the same axle (A literal axle between them is not necessary.) You have toe-in when the fronts are closer together, and toe-out when the rears are closer together. Observe the following diagram:
Toe Diagram
Front
_ _
,-' \ <---------------X---------------> / `-.
\ \ / /
\ \ X > Y = Toe Out / /
\ \ / /
\ \ <-----------Y-----------> / /
\ \ / /
\,-' `-./
_ Front _
/ `-. _-' \
/ / <----------X----------> \ \
/ / \ \
/ / X < Y = Toe In \ \
/ / \ \
/ / <--------------Y--------------> \ \
`-./ \,-'
Note: The examples shown here are much farther than any sane person would use for a toe setting for almost any purpose. They are designed for optimal appearance in ASCII art.
At nominal driving speeds, toe-in will produce understeer while cornering, since the inside tire will be pointing out of the turn, and toe-out will do the opposite. However, when you are driving hard, toe-in can actually increase oversteer, because your outside wheel is most heavily loaded, and the inside tire does not have as much traction. This tendency can be reduced by the use of a sway bar, which minimizes body roll, making the car dramatically more consistent.
Toe should be the last alignment setting you adjust, because both camber and caster will alter toe. Camber will not alter toe in a car with zero caster, but that is extremely rare.
Some cars also allow you to adjust the rear toe. Rear toe in makes the car more stable, and rear toe out makes the car turn more easily.
In general, you want no rear toe (most cars don't let you adjust it easily anyway) and only a little bit of front toe-in, approximately half a degree to one degree. Toe is usually changed by rotating the tie rod which connects from the steering rack or linkage to the wheel carrier or knuckle. Sometimes it is necessary to disconnect the tie rod end before adjustment can be made, but this is rare.