Under normal circumstances, breeding two Pokémon together in the Day Care results in three IV's being randomly selected between the two parents. (For instance, the baby might inherit HP and Defense IV's from Mom and Special Defense IV's from Dad, and have the rest randomly generated.)
However, with the Destiny Knot, FIVE IV's are inherited from the two parents instead. (So now we can have HP, Defense and Speed from Mom and Defense and Attack from Dad.)
Essentially, as other posters have stated, Destiny Knot makes breeding for IV's a lot easier.