Rooting an Android device refers to gaining "Super-user" privileges and complete access to the filesystem of the device's existing operating system, much like being Administrator on a Windows PC. The usual motivation for doing so is to gain access to apps or app stores that would otherwise be blocked on your device.
The term is sometimes mis-applied to the process of installing custom ROMs, or completely new operating systems, which is popular on the Nook Color. Some processes for getting a custom ROM on a device do involve rooting, but it's not always necessary, and it's a means to an end: the result is not a rooted device, but a device where the original operating system has been completely replaced.
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