Darkvision is the extraordinary ability to see with no light source at all, out to a range specified for the creature.
Darkvision is black and white only (colors cannot be discerned). It does not allow characters to see anything that they could not see otherwise -- invisible objects are still invisible, and illusions are still visible as what they seem to be. Likewise, darkvision subjects a creature to gaze attacks normally.
The presence of light does not spoil darkvision. If a character has darkvision with a 60-foot range, and he stands within a 20-foot radius of light, the character can see normally in the light, and 40 feet beyond the light because of his darkvision.