Position means acting last on every street (in position, IP) or first (out of position, OOP). The player in position sees the other player’s action before deciding, which lets him realize more of his equity, take free cards and control the size of the pot.
Out of position you act first, so you realize less of your equity: you cannot take free cards, you get bluffed off medium hands, and you rarely win extra bets when you hit. That is why the big blind defends somewhat tighter than raw MDF against big bets — though against small bets the price is so good that he must keep defending widely, or villain profits by betting any two cards.
In position, many plays become easy. You can check back the turn with a medium hand and see the river for free, and your check makes his river bets more often bluffs. You can float a small flop c-bet with backup equity, planning to take the pot when he checks the turn. In multiway pots position is worth even more, because you see every player act before you decide. The out-of-position player’s main weapon is the check-raise: he checks, and raises when the in-position player bets into a board that hits his range.
Worked example
FAQ
Why is position so important in poker?
Because information is worth money. The player who acts last sees what the other did before deciding, so he can take free cards, keep the pot small with medium hands, and bluff when the other player shows weakness.
How should you play out of position?
Check more, defend small bets widely, fold the bottom of your range against big ones, and use the check-raise with strong hands and big draws instead of leading into the raiser.