A community is a shared journal that a bunch of people with related interests can post in. For instance, I created the seattle_party community. If you're in Seattle, go here and click the link to join it... that's where I'll be announcing LiveJournal parties in the future, since most the people in "news" aren't around Seattle, so they won't really care.
Please be aware that this community feature is really new and there is so far no documentation whatsoever, so have patience while all the related features are finished.
Also, if you create a cool community, reply here and let us all know about it.