IPsec is short for IP Security Protocol. This is an additional layer on top of IP that introduces encryption features. Since it's right on top of IP there's no need to add applicationspecific encryption in every application level protocol (like SSH, DNSSEC, HTTPS, and so on).
As you have probably heard before "telnet is insecure". This is because there's no encryption that prevents eavesdroppers from listening in and stealing your password or other secret information. SSH was introduced to solve this on the application layer. This on the other hand doesn't solve the problem for FTP, which also is unencrypted and often use the same account information. IPsec on the other hand is not application specific but works below the application layer and nicely solves the problem for all applications.
IPsec is often used to create Virtual Private Networks (VPN).
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