The purpose of a literature review is to give an accurate and complete accounting of the current state of knowledge for whichever research question is being addressed. It is an essential feature of scholarship because without it the reader cannot judge whether the author is well-informed or whether the work that is being presented is novel and original.
Most often a literature review is a section of a scholarly article or book (usually toward the beginning) which summarizes and evaluates previous scholarship. Sometimes the entire scholarly work is nothing but a literature review, e.g. Annual Reviews.
A more detailed explanation is available via the links below.