The group seal is the rubber ring which sits inside the group head of your espresso machine and surrounds the shower plate. When you fit your portafilter and turn it, the outside lip of the filter basket meets the group seal to create an air tight seal. When water is then pushed through the group head, this seal ensure that all of the water goes through the ground coffee, rather than escaping over the side of the portafilter. This would result in less water going through the ground coffee, and what does go through would be at a reduced pressure.
It's good practice to replace the group seal on a monthly basis to ensure that it doesn't fail when you need it the most.