At Aaron Wall’s SEOBook blog, Peter Da Vanzo takes an in depth look at URL canonicalization and its effects on search engine optimization. Canonicalization is they way URL’s are standardized, like http://www.example.com as opposed to http://example.com or http://www.example.com/, etc.

It is important to the SEO process to pay attention to this. Da Vanzo writes:

If the search engines sees a page as being published at many separate URLs, the search engine may rank your pages lower than they would otherwise, or not rank them at all.

Canonicalization issues can split link juice between pages if people link to variants of the URL. Not only does this affect rank (less PageRank = lower rank), but it can also affect crawl depth (if PageRank is spent on duplicate content it is not being spent getting other unique content indexed).

URL Canonicalization is also sometimes referred to a URL normalization.  For more on it, read the Wikipedia page.