DirectX then, is actually an amalgam of several different multimedia APIs that together handle 2D (DirectDraw) and 3D (Direct3D) graphics, video (DirectShow), audio (DirectSound), input devices (DirectInput) and all manner of other things. Together they form a consistent platform for software to interact with the Windows operating system and the specialist hardware, like graphics and sound cards, that is now so essential for writing computer games. By gathering together many disparate platforms the process of writing highly complicated software like video games is made much simpler.
As well as making software developers lives easier, creating a universal, all encompassing and centralised platform also helps the rest of the IT industry and the computer buying public because now everyone has a single frame of reference from which to work. By specifying a certain set of features, a hardware designer knows what instructions a product must be capable of handling for it to achieve DirectX certification. Likewise, a software developer knows what features will work on hardware that is currently or soon to be available, so can tailor its software to use them. The upshot of this is that, a consumer can look at a game and see it requires a DX10 compatible graphics card and be guaranteed that as long as it has a DX10 compatible sticker, whatever card they buy will work with that game. At least that's the theory.
A small problem does arise from the fact that being DirectX compliant only requires a piece of hardware to be able to handle the instructions sent to it. The fact it may take a card forever to interpret those instructions doesn't affect the certification process. This is why you see graphics cards like the nVidia GeForce 8500 GT and ATI Radeon HD2400 XT being flaunted as DX10 compatible but when you get them home and fire up Lost Planet: Extreme Condition you end up with more of a pretty slideshow than a fast paced Akrid blasting shooting gallery.
So that's essentially what DirectX is but to explain what's so different about the latest version and also why it is only available on Vista, a quick history lesson is required...
First developed back in 1994 as a means of creating a unified platform for developing applications for Windows 95, DirectX was meant to tempt developers into creating games for Microsoft's latest offering rather than for the old but much loved DOS. By doing this, Microsoft was essentially abandoning the old platform in favour of the new one - sounds familiar doesn't it.
Actually, the reason for the wholesale change was not sheer greed but because of a complete change in the way the new operating system would allow software to communicate with hardware. By developing a more sophisticated driver mechanism Windows 95 was supposed to be a more robust platform for which to develop software. However, it did mean that a lot of old software developed for DOS would no longer work in Windows 95.
As time has passed, the DirectX platform has been poked and prodded and had new features tacked onto it, enabling games to progress from the now primitive looking Half-Life to the stunning visuals of S.T.A.L.K.E.R. However, certain underlying parts of the platform were becoming a bottleneck, which were holding further development back, and others were no longer needed. So, for the tenth version, Microsoft decided to go for a complete rewrite, which once again involved redesigning the way hardware communication was managed and subsequently would mean dropping support for previous operating systems.