A lot of people ask us this question and the simplest explanation is, IFC (Industry Foundation Classes) is a universal framework that allows different software packages to transfer information between each other with minimal data loss.
So what does this mean?
The traditional example would be an Architect using ArchiCAD collaborating with an Engineer who uses Revit Structure.
The typical workflow in this situation is for the Architect to output floor plans, sections, elevations etc. in DXF or DWG format.
The engineer then has to work on the project with 2D data. This obviously creates the opportunity for errors, in both directions I.E. Architect->Engineer and Engineer -> Architect.
If the Architect outputs an IFC file, he can then forward this to the Engineer who can then import it. As it is a 3D file format, the engineer can then work with same virtual building that the Architect is working with. Theoretically this will reduce the opportunity for errors quite drastically.
For more information on IFC check out some the information on Graphisofts website here