This is the most common question I have received and it is also the most basic so I will answer it first.
The easiest way to think of a citation is as a reference to your business. In the offline world a reference won’t usually be a link. Instead it will be a mention of your business and will include the following:
1. Business Name
2. Business Location
3. Business Telephone Number
These don’t always need to be located together on the same page, but when Citations (within the context of Google Places Local SEO) are mentioned this is what is meant. Simple enough.