Explained
Slicing is the process of cutting up a layout file to prepare it for the web. It can be used to cut out just buttons or logos to use independently on a web page or it can be used to create a whole web page with tables that hold everything in place.
Applications that are used for slicing:
Photoshop
Illustrator 10
Imageready
Fireworks
All use a similar process and a similar looking and working slice tool.