Nuclear fusion is when two atoms merge to form a new one. This reaction generates energy. The idea behind a fusion reactor is to build a power plant that uses this process to produce electricity, in much the same way a nuclear power plant does. Nuclear power plants use nuclear fission to produce energy. Nuclear fission is not the same as nuclear fusion. Nuclear fusion is also the same type of process the Sun uses to generate heat.
As of 2012, there are no commercial power plants that use this technology; there are a few academic ones; these include the Joint European Torus, in England. This reactor uses a principle called Tokamak. A tokamak uses magnets that are shaped like a doughnut to squish the atoms.