What are permalinks? Actually, they are just various links to entries of your website. Long ago, nearly all hyperlinks were permalinks, just because all content was static (static html pages). Later, with the development and popularization of programming languages, dynamic links began to appear. As example: dynamic listings of members, blogs, photos, etc. We ourselves can determine the permalinks scheme, in order to make them more friendly. As always, Rewrite engine (mod_rewrite module) is used to convert urls with different GET params into more human-readable urls.
In the beginning, I recommend that you check if ‘mod_rewrite’ is installed on your Apache server (phpinfo)