Text kerning refers the space between the letters. Now, this is not to be confused with tracking, which is the space between the words. Or leading: the space between lines (known as line-height in Web circles). Good typography utilizes both. The more white space in your layout the more reader-friendly your text will be.
By adding kerning to display text you can create a lighter, modern feel to your design. Similarly, by tightening the kerning you can create a denser feel to the layout, making it heavy and bulky on the page.
Adjusting the tracking can alleviate bad breaks in the copy caused by justified text. Slightly adjusting the tracking in a line is not noticeable, however for a light and airy effect try adding a little extra trackingto a paragraph for an easy-reading experience.
Last but not least, leading (pronounced ledding) is the space between the lines. As with everything else, the more space you have between lines the easier it is for the reader to separate the lines of text as they read. A good rule of thumb is to have at least a 4 pt increase in size (i.e. 12 pt font, 16 pt leading). Obviously, this guideline is based on a perfect world. Often you have to adjust your text to fit within the space determined by the size of the piece you’re working on. Just remember, using a little more space and making the piece readable will benefit everyone in the long run.
These terms, ideas and suggestions are just the tip of the iceberg that is Typography. Pay close attention to the text around you and you too will start to notice typography in action!