Letterboxing is a technique used to display widescreen content on a traditional 4x3 screen such as those used by old-style television sets. The technique is very simple — the picture frame is reduced in size until it fits the screen, leaving black bars above and below the picture. The effect is like looking through the slot of a letterbox, hence the name.
This is the "purest" method of converting widescreen films and programs to 4x3. The entire frame and artistic composition is retained, unlike the alternative pan and scan method. For this reason, letterboxing is generally preferred by film directors and enthusiasts.
However the letterbox format has not been as popular with the general public. The image is certainly smaller, making it more difficult to see on a smaller television. The problem is worse in countries using the NTSC standard, which has a lower resolution to begin with.
One of the most common complaints is that people feel they are losing part of the picture with letterboxing. Some viewers feel they are being ripped off when a program doesn't fill their entire screen. Of course this is somewhat ironic, given that the more widely-accepted pan and scan method does lose part of the image.