From DD-WRT website:
http://www.dd-wrt.com/wiki/index.php/WDS_Linked_router_network
My less technical explanation of the functionality, but not the nitty-gritty of setting it up:
I run DD-WRT (third party firmware) on my two routers at home. One router is connected to my modem, and to my desktop PC--this is the "Distributer". The other router is in the basement bedroom, where it is connected wirelessly to the Distributer. This router we'll call the "Receiver". Essentially, a router takes its WAN connection from a modem through its WAN port, and puts it through the antennae and its (usually 4) LAN ports. The Receiver, in this case, takes its WAN connection over its antennae, rather than the WAN port. It then distributes this connection across its 4 LAN ports, just like the Distributer does. Thus, it's like expanding your wired connection to 4 other Ethernet ports.
This is crucial for me, since my router has directional antennae, and can be placed anywhere within a single room to optimize the connection. I currently have mine hooked up to two devices in the bedroom without wireless (a networked storage device and a Slingbox) as well as my PS3 and my Laptop. Either of these could use their wireless connections but I find slightly better throughput using the router due to the more powerful signal strength (from positioning the router and antennae properly).
One important note is that you technically can use a second router as a repeater as well, thus extending the wireless range (dumbed down terms: bouncing the signal off of this router to add distance) but this will cost you half of your speed. Most people won't have a problem with this, due to internet speed being the limiting factor, but when sharing files on a local network it can still slow traffic down.
