Photo transfer is any process that allows you to transfer a photographic image from one surface to another. There are many techniques used to accomplish this. The technique I use here works best transferring toner-based images or text. Laser printers and most photocopiers use toner. You can use this technique with a ink-based printouts, but the quality of the transfer will not be as good and it the ink will blur and smudge.
Why would you want to transfer a photograph? It is easier to show you why than to write an explanation but it is worth mentioning from the start that if all you want is a single layer, pristine image then this probably not the right technique for you to use. If you just want to put a photograph on any given surface it is easiest to just glue a printout down (collage) or use a water-decal paper.
Photo transfer is useful when you want to layer multiple photographic and hand-rendered on top of each other. It is kind of an analog Photoshop. It is also useful if you like how the process breaks up the image in somewhat unpredictable ways.