Target Disk Mode allows you to use your Mac computer as an external drive.
It can be very useful if you have an issue with your hard drive. You can copy files to and from an unbootable drive or keep a bootable backup on an external drive.
Before Thunderbolt, Target Disk Mode utilised a FireWire connection.
Now with the new range of Thunderbolt enabled Mac computers, Target Disk Mode will allow you to connect two Mac computers together via a Thunderbolt connection.
When running Target Disk Mode a Thunderbolt icon will display along with the traditional FireWire icon. Once the Thunderbolt cable has been connected the FireWire icon will disappear.
The following link gives you a step by step guide on how to setup Target Disk Mode: