I was once sitting in on a senior presentation where a large very (self) important management consultancy were pitching their Knowledge Management solution to a very large media company. The presenter was asked by one of the directors - "What is knowledge management?", to which the presenter stared him in the face and answered in all seriousness - "Knowledge management, ...  is the management of knowledge!"

If you want a text-box definition, I suggest you start at wikipedia -  http://en.wikipedia.org/wiki/Knowledge_management  but if you want a more simple straight-forward  explanation, I suggest you think about what it is that makes your company different from your competitors, then think about how you would protect this advantage, and how you would leverage this difference/advantage against your competitors, or use it to win more business?  Can you even identify this advantage?

To be blunt, knowledge is power is the old saying, and it's no different in business. Sometimes this knowledge is held in people's heads, a problem not only confined to small family run businesses - whereby the founder still retains all the information, the contacts, the personal relationships. Sometimes this advantage is held by a group of outstanding sales-people, sometimes it is knowledge associated with a process, or a service or a patent.  This is the sort of knowledge you need to manage.

It may be as simple as getting everybody to securely share their contact lists, or making sure all processes are documented; all computer files are backed up securely. One easy way to decide what you need to "manage" is to consider what would happen in a disaster - if a key person were to leave or die, or if the office was flattened by a cyclone or your computer destroyed by a power surge.  Yes - disaster planning is a form of knowledge management, and probably a very good place to start your thinking.

Once you know what knowledge you have - then you can think about how to use it to your advantage. Sometimes, you don't actually know what you have, and only by doing the exercise, can you see whether alternative business strategies or opportunities exist that hadn't been considered before.

There is more to knowledge management than "a computer system". Collaborative technologies (wiki's, document management systems, blogs, etc.) are a great way of "enabling" a company and "engaging" the staff in the business, and a serious start on the knowledge management path. More important though, is the will and culture of a company to first record what it does, to document, then to learn, then to evolve. Quality control fits into all this, as does regulatory frameworks, and human resources.

So my own definition of Knowledge Management - it's a tool to first know what you are doing, then to learn to do it better.