Wow I can't believe how many wrong answers there are here. Sorry, but half of them are about 301 redirects. <--- wow.
One guy said it best tho... Ramesh. It's about duplicate content, and here is a way to explain it.
You have two pages which are almost entirely the same content for whatever reason.
Page A - has content about cars /pagea
Page B - has the same content about cars, but has a different URL. /pageb
Page A is what you want listed in Google and where you want the traffic to really go to.
So you set a canoncial tag on PAGE B... (the canonical tag lists page A) to say that Page A is the place the visitors and the engines should go.
Page A will get priority, and you are telling the search engines pretty much this:
"Hey, I have two pages with the same content, but I am setting the canonical URL to page A okay? This way I won't have any duplicate content issues."
Search Engine: "Okay thanks! We will make sure and list page A and not page B, thanks for letting us know, you won't have a duplicate content issue now."
There's your answer. Hope that helps.