Separation of power refers to the three branches of United States government listed in the Constitution, and who oversees those branches. For example, Congress controls the legislative branch, the president controls the executive branch, and the Supreme Court controls the judicial branch.
Interestingly, the U.S. Constitution does not explicitly separate the three branches of government. In the original draft of the Bill of Rights, James Madison included a proposed amendment to explicitly state the separation of powers, but his fellow members of Congress believed it was already implicit within the structure of the government, making Madison's amendment redundant. The first three articles of the Constitution list the implied breakdown of government power.
The separation of powers is important because it prevents the concentration of too much power in one branch. The founding fathers viewed the concentration of power as the road to tyranny, and hoped to prevent that problem. The Constitution also gives each branch weapons to fight off encroachment from the other two branches. For instance, the legislative veto is a tool of the legislative branch, while executive privilege is a tool the president can use. The founding fathers did not establish the separation of powers to be efficient; the goal was to maximize freedom and prevent tyranny.