The acronym "GMAT" stands for Graduate Management Admission Test. The exam is meant to assess general academic ability and knowledge and is used by most business schools as a pre-requisite to admission.
The GMAT tests in four main areas: verbal, analytical writing, integrated reasoning and quantitative. While it is used mainly for admission to business schools, it does not test any business knowledge or academic skills in that area. It is mainly a way for the institution to gauge a student's skills, strengths and weaknesses. It can then more readily be determined whether or not a student is a good fit for the programs offered.