What is “Agile Development”?

I reckon Agile and Iterative provides an excellent overview of the subject.
There are a number of agile processes out there:

• XP
• Scrum
• Open UP/Basic
• etc...

An agile process tends to focus on iterations, and client feedback, to allow for the inevitabilty of changing requirements.
A waterfall process tries to define all requirements up front, and tends to be more inflexible to changing requirements.
In fact, the book gives an interesting account into why the fallacy of waterfall was perpetuated for so long.
I definitely recommend having a skim through this book if you can find it.
Also, IMHO what employers tend to be looking for when asking about Agile experience:

• Experience of Test Driven Development
• Experience of Continuous Integration (eg: Cruisecontrol, Hudson, etc)

It pays to be aware of the following, but I wouldn't go on about these unless the company in question really has bought into agile. These disciplines are not always universally appreciated (which is a shame, as they are just as vital to preventing an agile project from accumulating cruft)

• Pair programming
• Refactoring 

http://stackoverflow.com/questions/240602/what-is-agile-development