Cycles are the number of times that your battery has gone from fully charged to discharged and back to charged (one cycle). You can also have a bunch of partial cycles that add up to a full cycle ie. you discharge to half and recharge and then do it again...that will only count as one cycle.
In the last 10 months I have gone through 80 cycles with no adverse affects to my battery. I would say I am a light user without being plugged in as I am sure there are users with higher cycle counts.
I don't have a reference but I believe apple says that after 300 cycles you should still have 80% of your original battery life.
check out the Coconut battery app (search google) and it will give you how many cycles you have done and a comparison of your current battery health to the original.
cheers