What the button means
The dealer button marks the nominal dealer for the hand. In a home game, that player may deal the cards; in an online game, the software deals them. The button also helps set the order of play.
After a hand ends, the button moves to the next seat. This rotation gives everyone a turn in each position over time.
Blinds and the first action
The player immediately to the left of the button posts the small blind, and the next player posts the big blind. These are forced bets that start the pot.
Before the flop, action starts with the first active player to the left of the big blind. After the flop, the first active player to the left of the button usually acts first. In a heads-up hand, the button posts the small blind and acts first before the flop.
Early, middle and late position
Players who act near the start of a round are in early position; players who act near the end are in late position. The cutoff is the seat immediately before the button. The button is also called the dealer position.
Position names depend on how many seats are at the table. A six-player table has fewer early and middle seats than a full table, so use the action order as your guide.
Why position matters
When you act later, you have already seen more of your opponents' decisions on that street. That extra information can help you choose whether to check, bet, call or fold. Position does not guarantee a good result, but it is part of the context for every decision.
For an introduction to the betting order, see the guide to Texas Hold'em rules.