I realize this has been covered to no end on the web in much more detail and compulsion than I would here. But I do use this quite a bit, so here is my version of it.

The PHP Fancy Hidden Extension Technique, or PFHET is basically hiding the .php from your users and the capturing whatever comes after the filename as your query to that PHP file. So the idea is that you can ditch the whole "action.php?query=something" altogether in favor of something like "action/something" which is obviously nicer -- and search engine friendly I might add.