From Diablo Wiki
Runes have always held a fascination to man through history, and Diablo II is no exception. The Diablo-runes hold many secrets in their uses and their meaning in terms of the mysterious runewords. In gameplay terms, they are small (1x1) items that drops off of monsters, and has no function on their own, as opposed to charms.
socketable items, and through the item they provide a player with bonuses of different kinds. They can be upgraded with the Horadric Cube to one of the higher "rune ranks" from the rune list. A combination of runes, entered in sequence into an item of exactly the right type and right amount of sockets will create a powerful Runic Item, or a runeword. With these guides at your hands, your main problem will probably be hunting for the runes!
If you ever have any questions about runes, you can also look through the rune FAQ.