WakeLock is a mechanism to keep the device on, as written here and here
It is used for example when you need to do things even when the device seems to be asleep, like downloading files from the internet.
Wakelocks should never be used unless you really need them. The reason is that they consume more battery, and if you have a bug that won't release them when needed, your app will keep consuming the battery of the device. There are even apps to detect such problematic apps (like "wakelock detector") .
Also, a small tip for people who just wish to let the screen stay on (as long as the app is shown): you don't need (and you shouldn't need) the wakeLock permission. Instead, you should just set "android:keepScreenOn="true"" on the layout of the current activity. More about this is talked about on the lecture "Coding for Life -- Battery Life, That Is" (presentation here)