An iteration is a fixed period of time devoted to completing one increment of functionality.
Each iteration results in a complete chunk of work that is potentially shippable. As more iterations are completed, the software's capability increases.
Features with the most business value should be completed first. This approach yields the fastest, most beneficial results.
Iterations are referred to as "sprints" in Scrum.
Additional information The Scrum Papers:
Nuts, Bolts, and Origins of an Agile Process