From the New York Magazine

What is decanting? Simply put, it means transferring (decanting) the contents of a wine bottle into another receptacle (the decanter) before serving. It may sound silly (how can pouring wine from one vessel into another make it taste better?), but it works.

Wine geeks love to sit around for hours and debate the pros and cons of this procedure, but I'm confident -- based on my experience of opening, decanting and tasting hundreds of thousands of bottles of wine -- that careful decanting can improve most any wine.

Obviously, it's not the mere act of shifting liquid from one container to another that accounts for the magic of decanting. Rather, when you decant a bottle of wine, two things happen. First, slow and careful decanting allows wine (particularly older wine) to separate from its sediment, which, if left mixed in with the wine, will impart a very noticeable bitter, astringent flavor. Second, when you pour wine into a decanter, the resulting agitation causes the wine to mix with oxygen, enabling it to develop and come to life at an accelerated pace (this is particularly important for younger wine).

Check out the New York Magazine for information on how to decant.