They're just variables you set on your system that various programs/processes can read. A fairly standard example in javascript circles would be setting your NODE_ENV variable to "production" or "development", altering how node code is executed on your system (for example showing more debug messaging when in development).
With most shells there's a way to set them for the current session, and a way to set them for all sessions. The following is meant to be a guide on how to set env vars in the various shells.
Setting for the session: