Source : Free On-Line Dictionary of Computing

Certificate Authority
     
         (CA or "Trusted Third Party") An entity
        (typically a company) that issues {digital certificates} to
        other entities (organisations or individuals) to allow them to
        prove their identity to others.  A Certificate Authority might
        be an external company such as {VeriSign} that offers digital
        certificate services or they might be an internal organisation
        such as a corporate {MIS} department.  The Certificate
        Authority's chief function is to verify the identity of
        entities and issue digital certificates attesting to that
        identity.
     
        The process uses {public key cryptography} to create a
        "network of trust".  If I want to prove my identity to you, I
        ask a CA (who you trust to have verified my identity) to
        encrypt a {hash} of my signed key with their {private key}.
        Then you can use the CA's {public key} to decrypt the hash and
        compare it with a hash you calculate yourself.  Hashes are
        used to decrease the amount of data that needs to be
        transmitted.  The hash function must be {cryptographically
        strong}, e.g. {MD5}.
     
       
     {(http://home.netscape.com/comprod/server_central/support/faq/certificate_faq.html#11)}.
     
        (1998-03-30)