Exactly what it sounds like, the person receiving it pays the delivery guy. I'm pretty sure it isn't worth it on smaller packages, I'm guessing the shipping company will take a cut for "processing" the payment.
I've given stuff away before, even paying for shipping. IMO it's not that big of a deal to pay a few dollars shipping something that I don't really need, if it'll help somebody out. I'm not going to give away a ton of parts, but if a guy needs something small and can't get it, I see no problem.

