What is a Clustered Index?
In simple terms...

A telephone directory: the data is the index/the index is the data. To look you up, I'd start with Rezaei, Amir for example. No external lookup is needed.

In database terms: 

The table data and clustered index are one and the same (in SQL Server, also InnoDB, Oracle IOT)

Best practice is narrow, numeric, strictly increasing (think IDENTITY or Autonumber column). Data types like GUIDs are not a good idea

Links to read (to avoid bloating this answer)


"Effective Clustered Indexes" (Simple Talk)
Wikipedia
MSDN (SQL Server 2000)
MSDN (SQL Server 2005+)


Edit, to fully explain my best practice suggestions, follow the link in  Eric Humphrey's comment: Queen of Indexing: Kimberly Tripp