Yeah the graphics card or GPU is a processor which performs best with certain types of calculations, which are everything from 3d, 2d graphics or video playback.
I could have explained, but MacRumors did a better job already... So I stole from them:
Advantages to using a graphics card
The math involved in altering images is very similar to what is already used in 3D acceleration. Therefore, there are ways of using the graphics card to process two dimensional images and do it incredibly quickly because the graphics chip is built to handle that kind of math. Whereas your CPU (G3, G4, or G5) is a general purpose processor, the graphics chip (often called a GPU) is designed to do very high level math functions very quickly; in some cases a GPU can perform an operation several times faster than a general purpose processor (even with Velocity Engine). The use of the GPU in such a way began in Mac OS X 10.2 (Jaguar), when Apple introduced Quartz Extreme. Quartz Extreme uses the graphics card to handle window composition and also powers Exposé in Mac OS X 10.3 (Panther).
The Graphic Card Does a few things. First it holds some RAM Memory deticated for Graphics Processing Older Models has 32 Megs Newer ones are 128 Megs-around 512 Megs. Having to Little Video RAM will cause you problems when attaching aditional Displays or using High Resolution or very Large Displays... Also if you don't have enough RAM there won't be room for the card to do some extra effect...
Next the the GPU this is a second processor (like the Intel Core 2 Dou) but normally more specialized for graphics processing. So on your Mac you see transparancies, 3d effects such as zooming in and out of dashboard, and Games all this and more the GPU handles. It saves your main processor from doing the work. Making the system run faster.
The Final Job is to take the information in memory and the calculations and display it on your screen.