What is baking?


I recently read a wiki about physics/rigid body:
There is an article called Dominoes and further How to.
There is written (above the three rendered dominoes images)
>We are now going to bake. Save. In the Game menu (in the top of the screen),
>select Record Game Physics to IPO, Enable all frames. The recording is near real-time.

I do not understand what it means. What does baking do? And I see no baking action.
In the text they say Save, where is the baking? What does baking do?
What does: Record Game Physics to IPO and Enable all frames mean?

It seems that it is possible to use the blender game engine to create animations for later rendering. How I can do this? Is baking one step to achieve this?

Thanks for any help!

here’s an example:
If you need to animate a ball going down a hill it’ll be quite hard to make it
“by hand”!
Enabling the Dynamics of the game engine, the ball will roll by itself and you can
“record” the ball motion in IPO keys, and later integrate it in “normal” Blender scenes