To expand on Gandy's answer: VNC provides 'remote control' facilities. If you have the server side, this means your machine is able to be remore controlled from another (the viewer). IE someone can operate your computer from another computer on the network.
I believe it also means your machine could be monitored IE someone can watch what you are doing on it. Not sure about this though, and I don't know whether you'd be aware of someone monitoring or not as I've never tried it.
This software is usually used by support personnel to either install new software on the remote machine or to assist users with problems.