Saturation = How Colorful

If you move from the outer ring of a color wheel toward the center, you'll notice that the colors mellow out and become much less colorful. In fact, the shades in the absolute center of the color wheel contain no color at all (they're gray). Photoshop describes how colorful something is by using percentages, and calls it saturation. If something has no saturation at all (0%), then it has no color at all (no hint of any of the basic colors that show up around the outer edge of the color wheel), and therefore will only contain shades of gray. If, on the other hand, you have something that has 100% saturated colors, it will be as colorful as possible (just like the colors that appear on the outer rim of the color wheel).