What does a 'in App purchase' mean on my iTunes receipt?

Some apps allow the user to purchase things. For example, you can purchase an upgrade to the app which removes advertisements; or "tokens" within a game so you can advance through the game faster/easier; or upgrade from what amounts to the trial version to the "pro" version.

You can disable in-app purchases from Settings->Store if you wish to disallow them in the future. Set appropriate restrictions within Settings to prevent someone else from re-enabling in-app purchases if needed.