A netboot is a the process of booting an operating system over a network. The operating system image is stored and on a central server's hard drive, and loaded into the RAM of the PC which is requesting a netboot.
In many ways, it is similar to booting from a LiveCD or floppy, but the storage media is on a network.
Some ethernet cards have a hardware chip included that allows booting over a network. This option is selected from the BIOS configuration on the PC.
Alternatively, a bootup can be specified from a boot loader on the local PC hard drive, such as GRUB. See this discussion.