From Joomla! Documentation
Search engine friendly URLs is a term commonly abbreviated as SEF URLs or SEF for short. Normal Joomla! URLs look something like this:
You can optionally have URLs display to look like static HTML pages like this:
Since Joomla! 1.5, there are built-in options for generating SEF URLs. These are enabled by changing the "SEO Settings" (Search Engine Optimisation) in the Site tab in the Global Configuration screen in the Joomla! back end. There are also third-party extensions that create SEF URLs for Joomla!.