Wayland is a Display Server Protocol, meaning it is a specification of how a program wanting to display something like a window communicates with another program, the display server, which handles drawing to the screen.
It matters because it vastly simplifies and modernizes display server infrastructure.
X is huge, with many parts from the 80s and 90s that were simply not needed today, creating a fully compliant X Server with all extensions was pretty much impossible, which is the reason pretty much only X.org existed as a full implementation.
Some benefits for users are no screen tearing, VRR and support for more complicated setups like having multiple monitors all with a different refresh rate, which was a pain in the ass on X but is no problem on wayland.
X is going to die, especially with the fact that frredesktop and the two big DEs, GNOME and KDE are working on it. Some distros come with wayland by default already.