The crop factor of a sensor has to do with its size in relation to a full-frame camera (i.e. a 35mm film camera or a top-end DSLR with a 35mm sensor.) There are a variety of crop factors, and depending on the camera manufacturer, they differ.
Canon generally has three sensor sizes in its DSLR camera: full-frame (1x), APS-H (1.3x), and APS-X (1.6x). Most of canon's cameras make use of an APS-C style sensor, and have a 1.6x crop factor. Few of canon's cameras use an APS-H or FF sensor.
Crop factor, while interesting from a sensor size perspective, has a more useful meaning. If you take a shot of a scene with the same lens in the same location with both a FF and an APS-C camera, the 1.6x crop factor causes the photo from the APS-C to appear "more zoomed". If we assume that you took the photo with a 50mm lens, the FF 1x image would appear correct for a 50mm lens, but the APS-C 1.6x image would appear as though it was from an 80mm lens. (Simply multiply the real focal length by the crop factor to get the effective focal length.) This simple effect can be useful in some scenarios, such as say photographing birds at a great distance. The cropped sensor gives the appearance of being closer to your subject.
It is important to fully understand your crop factor, and what its effect is on the lenses you guy. Many cameras with cropped sensors support two types of lenses...full-frame lenses as well as "short-back" lenses. A short back lens is one that is designed for that particular kind of sensor, and will reflect the real focal length. For example, an EF-S 18-55mm lens will only work on an APS-C style camera, but will behave as an 18-55mm on such a camera, rather than a 29-88mm lens.