Whenever you write something with http://www.xyz/ in it, or x.y@blah.com most computers recognise that this is a web address or an email address and turn them into an active link - clicking on them will open the web page or launch a new email message.
In Twitter, and in similar programmes, adding # in front of a word does two things. It turns the word into an active link (clicking on it from within Twitter or Twitter app will take you to the search page containing all instances of that hashtag) and it also collects up all instances of it that can be shown together (ie aggregates the tweets containing the hashtag).
This means that other aggregators, such as WTHashtag (What the Hashtag) or Twapperkeeper - examples below, can take the feed and present it on their page (ie syndicating the content on another page) - this is basically what RSS feeds do. RSS generally stands for 'really simple syndication'.
Examples
Twitter search, for #ADA2010 tag which corresponds to the American Diabetes Association conference tweets (note that # is expressed as %23) http://twitter.com/home#search?q=%23ada2010
wthashtag for ADA2010 (note that it picks up the #tag but removes the # from the URL)
http://wthashtag.com/Ada2010
This arose from explaining to some colleagues what a hashtag is.
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