A rar file is an archive similar to a zip file. Use WinRAR to extract the compressed files, don't forget to scan them with up to date anti-virus software before getting too carried away though.
Just to add, once WinRAR is installed, just right click on the .RAR and click 'extract here'.
If you have maybe downloaded something off the internet and there are multiple .RAR's just right click on any one of those and extract and it puts them all in to one file for you, aka an AVI file.