Personalization essentially refers to modifying a visitor's experience on the basis of pre-defined rules to make it more fruitful so as to increase a chance of conversion.
A brief example: Consider a real estate website that offers 2 services - commercial real estate and personal real estate. By segmenting users on the basis of their behaviour, the website can be personalized so as to appeal to each visitor.
You can have a look at some of the documentation here: http://docs.adobe.com/docs/en/aem/6-0/administer/personalization/personalization.html
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