VRML is (er...was!), in the words of the VRML Consortium (now the Web3D Consortium), "an open standard for 3D multimedia and shared virtual worlds on the Internet."
VRML is, in my words, a method of building a 3-dimensional digital object which can be displayed and manipulated in a web browser. I suggest visiting the Web3D Consortium for detailed information and other resources.
VRML became the de facto standard for sharing and publishing data between CAD, animation, and 3D modeling programs. VRML was integrated into many software applications and continue to used on many web sites.
However, VRML appears to have faced some problems and has been left to fade away. It is has been replaced (so to speak) with a newer technology called X3D, but my knowledge of X3D is very limited as I haven't paid enough attention to it.
It appears that the basic problem that VRML faced was in fact that not enough people paid attention to it.
VRML was never truly supported by the major forces that drive internet technologies. It may have had a different presence on the internet if Microsoft, Netscape, Mozilla, Adobe, and the World Wide Web Consortium had showed more interest in the technology.
To my knowledge, VRML has not been updated since 1997. In fact, VRML97 was a language specification that the developers had wished would draw world-wide interest.
In my own experience I found VRML to be quite exciting, but the documentation was limited, the tools were underdeveloped and rather clumsy, and ultimately the framework of the language was difficult to learn, practice, write, and use. Then, on top of that, web browsers did not have native support for the language which required the users to download and install a 3rd party plug-in to merely view VRML inside their web browser.
All in all, 3D on the web is still quite limited and I believe that some of the problems that eventually killed VRML (and are currently keeping X3D buried in obscure corners of the internet) may be overcome. Web pages, with all their current dynamism, are still rather 2-dimensional. There's a long way to grow in the 3rd dimension.