rock that is either cultured for a couple years or harvested from the ocean. It includes all sorts of life forms (bacteria, algeas, inverts, worms, and many others) that filter, eat and break down wastes, excess foods and polutants into safer forms.
Basically live rock is the primary filtering media for salt water aquariums. Without it, you should expect to see a rise in amonia - the basic waste product from the fish.
The live sand and your filter may have some bacteria to help break down the amonia into nitrite but both are toxic and will eventually build up and polute the tank to the point wher it may kill the fish. Generally speaking, filters and sand alone do not do an adequate job of providing enough or the right types of bacteria to keep up with the waste products from the fish and other upper life forms. Where live rock, provides enough density and surface area to harbor these needed lower life forms to detoxify the water. There is a ballance that will need to be established and maintained, achieveing this ballance is called cylcling a tank.
I suggest you do some additional reading on starting up a salt tank - here is a good place to start:
http://www.melevsreef.com/tanks.html
and
http://www.reefcentral.com/modules.php?s=7fe125499b57e1b1779691378d77fc98&name=Content&pa=showpage&pid=1