IFA or IDFA stands for “identifier for advertisers.” It’s a random, anonymous number that is assigned to a user and their device. It is temporary and can be blocked, like a cookie.

When you look at an app, or browse the web, your presence generates a call for an ad. The publisher’s site that you’re looking at then passes the IFA to the ad server. The advertiser is then able to know that a specific iPhone user is looking at a specific publication and can serve an ad targeting that user. IFA becomes particularly useful, for instance, if an ad server notices that a particular IFA is looking at a lot of different car sites. Perhaps that user is interested in buying a new car. They’ll likely start seeing a lot of car ads on their iPhone.

More importantly, IFA will allow advertisers to track the user all the way to “conversion” — which for most advertisers consists of an app download. Previously, advertisers had no idea whether their ads actually drove people to download apps or buy things. Now IFA will tell them.

The IFA does not identify you personally — it merely provides a bunch of aggregate audience data that advertisers can target with ads.

IFA: Apple's iPhone Tracking In iOS 6 – Business Insider.

Fortunately you can turn it off this time.