Namelock just refers to have the other player's name highlighted. It is a crucial skill though, because if you hold the mouse button their name will stay highlighted even if they move off screen, hence "lock." You can do many things from namelock, such as cast spells, tele on top of someone, keep them locked (and then attack when they dont expect it). Namelock only persists when the other player is on your map, if you move off it breaks namelock.
Many characters depend upon lock, including Trappers, WWsins, BvCs, Druids, some ES/FB sorcs, necros, hammerdins (at least sometimes) and some of the best blizz sorcs. Namelock is such a useful skill that 3rd party programs have been invented that give it constantly (commonly called auto-aim). Hope this clears it up a bit.