It means the largest resolution of the photos will be 640x480. It isn't good in terms of digital cameras but in terms of phones, it is the standard (for now).
By the way, resolution means how many pixels wide and high. Most people nowadays set their monitors to display 1024x768. If you were to view one of your photos on a moonitor with that resolution, it'll cover over half of the screen.
More and more phones are coming out with 1.3mp (megapixel, 1.3million pixels) cameras which have a resolution of 1280 x 1024. A phone is being prepared for release in South Korea with a 5mp camera which is.. vast to say the least.
If you were buying a digital camera to get decent quality snaps for an affordable price, you'd want 3-4mp, so phones aren't that far away from replacing cameras completely.
Err, apologies for rambling a bit :D