SDK = Software Development Kit.
It provides a set of facilities (at a minimum: a compiler, a library of pre-written utilities or program building-blocks, and some means of simulation or debugging) with which somebody can write new computer programs.
Before you can write software for any given computer platform (be it a Mac, or an iPhone, or any other kind of computer) you have to have an SDK for it.
Some SDKs are officially supported by the computer manufacturer (eg. XCode for Mac OS X, or Visual Studio for Windows). Others may have support by other 3rd party distributors (eg. Borland's offerings).
Others are totally unofficial, and unsupported (eg. the current system that enthusiasts have come up with for jailbreaking and writing software for the iPhone.)
It has been announced that Apple will be releasing an officially supported SDK for the iPhone sometime within the next couple of months.
We don't know yet any more details about it - can you get it for free, like you can XCode for the Mac? Or will you have to pay for it, like you do with the full-featured editions of Microsoft's Visual Studio? Can developers choose any distribution license/scheme for the programs they create? Or will they have to enter into a distribution deal through Apple? So far, we don't know.