How it works
For a buy order, you specify a condition such as "I want to buy if the price falls to this level or below"; for a sell order, "I want to sell if the price rises to this level or above." The order will only execute at the specified price or at a more favorable one.
Difference from market orders
A market order (see related page) does not specify a price and instead prioritizes ease of execution. A limit order lets you control the price, but has the drawback that the trade will not be executed if the price never reaches your specified condition.
Some investors check the order book (see related page) to see where orders are concentrated before deciding on a limit price.