OpenID is an open standard that describes how users can be authenticated in a decentralized manner, obviating the need for services to provide their own ad hoc systems and allowing users to consolidate their digital identities

An OpenID is a way of identifying yourself no matter which web site you visit. It’s like a driver’s license for the entire Internet. But, it’s even more than that because you can (if you want) associate information with your OpenID like your name and your e-mail address, and then you choose how much web sites get to see about you. This means that web sites that take advantage of OpenID won’t bother you for the same information over and over again.

Because OpenID identifies you uniquely across the Internet, it is a way for web sites and other people to connect the different accounts you’ve created online into a more cohesive persona. Once you establish yourself as the person who uses a particular OpenID, whenever someone sees your OpenID in use, anywhere on the Internet, they’ll know that it’s you.
OpenID is no less (or more) secure than what you use right now. It’s true that if someone gets your OpenID’s username and password, they can usurp your online identity. But, that’s already possible.
Identifiers
Starting with OpenID Authentication 2.0 (and some 1.1 implementations), there are two types of identifiers that can be used with OpenID: URLs and XRIs.
There are two ways to obtain an OpenID-enabled URL that can be used to log into all OpenID-enabled websites.
1.    To use an existing URL under one’s own control (such as one’s blog or home page). One can insert the appropriate OpenID tags in the HTML or serve a Yadis document.
2.    The second option is to register an OpenID identifier with an identity provider. They offer the ability to register a URL (typically a third-level domain, e.g. example.example.com) that will automatically be configured with OpenID authentication service.

Sources:

http://en.wikipedia.org/

http://openidexplained.com/