Internationalized Domain Names (IDNs) are domain names represented by non-Latin (think of characters not in the standard alphabet) local language characters such as Arabic or Chinese. Such domain names could contain letters or characters from non-ASCII scripts (for example, Arabic or Chinese). The first three production non-Latin top-level domains were placed in the DNS root zone on May 5, 2010. Check out this video that explains the purpose of IDNs:
Visit the ICANN Blog for more information on IDNs.