A LAN party is a temporary, sometimes spontaneous, gathering of people together with their computers, which they network together primarily for the purpose of playing multiplayer computer games. These local area networks (LANs) come in various sizes, from very small (two people) to very large (more than 10,000 people). Small parties can form spontaneously, but large ones usually require a fair amount of planning and preparation on the part of the organizer.

LAN party events differ significantly from gaming centers and Internet cafes in that they are generally bring your own computer (BYOC) and are not permanent installations, often taking place in general meeting places or residences.

Source: http://en.wikipedia.org/wiki/LAN_party

It's also become popular to connect seveal video game consoles together on a LAN, for much of the same multiplayer gaming fun.