Motion capture is essentially the process of translating the actual movements of a live person into the digital movements of a computer-generated character. In this case, it was the process of capturing the movements of actor Andy Serkis and transferring them to a CG gorilla.
When you watch a scene of Peter Jackson's "King Kong" in which the gorilla runs up an embankment in the jungle, what you're actually watching is heavily edited and animated footage of Andy Serkis running up an embankment in a motion-capture suit. For all intents and purposes, Andy Serkis plays King Kong. He acted out each scene in a motion-capture suit, and his performance was sent to the animation department to be applied to the King Kong 3-D model.
There are several methods of motion capture, including optical, electromagnetic and mechanical. A mechanical motion-capture setup involves a heavy suit that is basically one big mechanical sensor. It relays data to the motion-capture computer when a part of the suit detects movement. An electromagnetic system involves a suit of magnetic sensors that receive signals from a magnetic transmitter. Each time they pick up a signal, they send their location information to the computer. "King Kong" used an optical system, which is simpler than either of these setups, at least for the actor in the suit.
This optical system consists of a lightweight suit, a lot of reflective dots and about 70 motion-capture cameras that feed information into computers running 3-D motion-capture software. The motion-capture studio is a huge warehouse converted into a high-tech space with bare-bones sets and more cameras and computer equipment than you find in an electronics store. The sets are simple structures meant only to simulate the kind of terrain and props that the digital King Kong interacts with on the screen. They don't have to look real, because the cameras can't see them. The cameras in this studio could only see the reflective dots stuck to Andy Serkis.