In a nut shell relief is a very slight forward bow in the neck to make room for the string which when set in motion tends to vibrate in a circular pattern. The biggest circle being the center of the string lenth from what ever fret you are pressing to the saddle. It's most effective when fretting the first few frets. As the string length gets shorter so does the arc that the vibrating string makes.
So the peak relief is in the middle as Rudy4's pic shows.
Relief is not a tool used to set action on a guitar however changing the relief does also change the action in many cases. When setting up a guitar the first thing you do is set the relief then adjust the action at nut if necessary and saddle. But sometimes a customer comes in complaining about high action and the guitar has excessive relief. In that case often times just tweaking the truss rod to get the correct relief is enough to bring the action down to where it should be.
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