DVD regions are defined as:
Region 1 - 1: U.S., Canada, U.S. Territories
Region 2 - Japan, Europe, South Africa, and Middle East (including Egypt)
Region 3 - Southeast Asia and East Asia (including Hong Kong)
Region 4 - Australia, New Zealand, Pacific Islands, Central America, Mexico, South America, and the Caribbean
Region 5 - 5: Eastern Europe (Former Soviet Union), Indian subcontinent, Africa, North Korea, and Mongolia
Region 6 - Peoples Republic of China
Region 7 - Reserved
Region 8 - Special international venues (airplanes, cruise ships, etc.)
On some DVDs you will see Region 0 code, which means that these DVDs are "region free" and can be played on any DVD player.
Movies are released on DVD at different times around the world, typically America and Canada first, Australia and Japan 6 months later, and Europe 12 months after US release. In some instances, DVD movies are available for purchase in America and Canada before they are released in European cinemas.
According to OpenDVD.org, DVD players with region codes are illegal in New Zealand. Additionally, DVD regions are rumored to violate certain World Trade Organization laws.
What all this means to average consumer?
When you are buying movies on DVD or DVD player always check what region it is for. There are several companies that sell "code free" or "region free" DVD players, so you can buy one. If you are using your computer to play DVDs, you probably know that software DVD decoders allow you to change DVD region but, usually, limited number of times.
There are also ways to disable regions in your player (if you know electronics) and there are region free players.