Definition
The intention behind link aggregation is to have a logical interface with higher bandwidth other capabilities by combining a set of physical interfaces.

Different Names
Link aggregation is also called Ethernet Bonding or NIC Bonding or Network Bonding (or just Bonding), NIC Teaming (or just Teaming), Port Channel, Link Bundling, EtherChannel, MLT (Multi-Link Trunking), Trunking, Fat Pipe, etc.

Uses
The link aggregations are normally used as a solution for different requirements like
1. using limited IP address space to serve large amount of bandwidth using a number of physical links more than IP addresses
2. security where aggregated interface hides the existence of physical interfaces
3. better connection availability (no change in connection status even if one of the physical link fails)
4. higher performance using physical interfaces with performance less than required
5. load balancing to effectively use physical links to their capacity

Standard
Link aggregations now conform to the IEEE 802.3ad standard. The definition is now moved to a standalone

standard IEEE 802.1AX. The standard defines link aggregation like this: "Link Aggregation allows one or more links to be aggregated together to form a Link Aggregation Group, such that a MAC client can treat the Link Aggregation Group as if it were a single link". The standard also defined the Link Aggregation Control Protocol (LACP) for the networking devices that intend to support IEEE 802.3ad standard. The devices with LACP support can be used to form a link aggregation via LACP.

Applications
Based on the requirements, link aggregation can be typically used in different cases. It can be between two switches thus providing higher bandwidth between the hosts connected through them without hardware upgrade. It can be between a server and a switch in which case the network connection between the server and the switch can provide higher performance. It can also be between servers to provide higher bandwith transfers between them.

Other Sources
Link Aggregation at Wikipedia
Sun Documentation on Link Aggregation
IEEE 802.1AX-2008