I've heard about this concept, but what is it?
A texture atlas is simply a way to stuff multiple sprites into a single texture. You also will need an index into the texture so that you can find where each of the sprites are located.
The reason these are used is because it's more efficient to bind a texture once and change the UV values being used than to bind multiple textures for each sprite you draw.
Here is an article from Gamasutra on texture atlases that helped me a lot when I was first getting started