You can find a lot of information about Sound Check by searching the iTunes forum for "Sound Check."
Basically, when it's enabled for playback (there's also a separate preference for burning CDs), iTunes will scan all of the files in your iTunes library and add extra (invisible) fields to the song tags containing information about volume adjustment. Sound Check is not open source, and there's pretty scarce documentation about it from Apple, so it's quite hard to say what it really does in the way of computation. However, I think it's safe to say that it manages to make loud sounds quieter and quiet sounds louder. iTunes will then read the extra Sound Check tag information on playback and make on-the-fly adjustments to playback volume.
You may like this effect if you shuffle your music or have playlists of tracks from different albums, etc. If you like listening to albums as a whole, I would suggest not using Sound Check, as it does not preserve the intentional subtleties in the music.
Since Sound Check is enabled by default in iTunes, your files most likely contain the extra volume adjustment information already. If you want iTunes to ignore this information, disabling Sound Check will accomplish that, but the extra tag information will still be part of your files.