Guitar action refers to the height of the guitar strings over the fretboard, which is the distance between the strings and the fretboard.
It is necessary to get the right action on your guitar because that will determine the feel and tone of the guitar. Generally, an action on an acoustic guitar is at around 7/64″ (2.8mm) on the low E string and 5/64″ (2.0mm) on the high E string.