Manifold pressure is a measure of the pressure in the intake manifold. The intake manifold comprises the compartment in in the induction system, after the throttle plate (butterfly), and before reaching the intake valve.
In the case of an engine sitting on the ground, not running, manifold pressure will always be ambient pressure. That is, if at sea level on a standard day, manifold pressure in an engine which is not running, will be 29.92" Hg. At approximately 5,000' MSL on a standard day, the same non-running engine will register about 25" of manifold pressure (based on the rough lapse rate of approximately 1" per thousand feet at lower elevations).
If the throttle is closed, meaning the butterfly or air valve/throttle plate placed in the closed position, and the engine started, we will see an immediate drop in the pressure in the intake manifold. This is easy to visualize, if you imagine the engine as a big suction machine, like a vacum cleaner. If you put your hand over the hose end on a vacum cleaner, the pressure in the hose will rapidly drop. It works the same way in the engine.
Cylinders act as an air pump, drawing air from the intake manifold, with each cycle. On the intake stroke, air is drawn into the cylinder. The intake valve shuts, and the piston starts up on the compression stroke. The spark plug fires just before it reaches the top of the compression stroke (Before Top Dead Center), and the piston starts down. Burning gasses expand on the power stroke, and as it reaches the bottom, the exhaust valve opens. The piston starts up on the exhaust stroke, and pushes exhaust gasses out of the combustion chamber. Once again the piston starts down, the intake valve opens, and air is drawn from the intake manifold.
The act of the piston dropping creates greater space in the cylinder, to the effect of dropping pressure rapidly. As the intake valve opens, this low pressure draws air (or the mixture) from the intake manifold. The combined effect of each cylinder drawing air from the intake manifold, relative to the opening created by the throttle plate, lead to a given manifold pressure.
As the throttle is closed, manifold pressure drops, representing suction. Typical suction values for idle on most engines are in the order of 12" Hg. Values higher than this usually indicate induction leaks. This leads to a lean idle mixture. It can also affect mixture settings at higher power settings. If the engine is turbocharged, at higher power settings, above barometric (ambient pressure) the effect is reversed; instead of drawing air through induction leaks, the mixture is pushed out of the induction system, leading to potential fire, power loss, and a reduced maximum manifold pressure. In extreme cases detonation, power loss, engine damage, and other problems can occur, depending on the nature of the leak.
In a normally aspirated engine (non-supercharged or non-turbocharged; non-boosted), the maximum manifold pressure achievable at any given time is barometric pressure, or ambient pressure measured in inches of mercury. It's for this reason that above 4,000-5,000, normally aspirated engines can't produce more than 75% power, and manufacturers generally give carte blanche leaning authority to the pilot (and generally restrict it below those altitudes as a catch-all policy to prevent over-leaning at high power settings).
Actual manifold pressure in flight will be slightly higher than barometric, due to ram pressure rise as air is forced into the induction at higher airspeeds. Slightly higher manifold pressures may be experienced due to increased airflow from the propeller at higher power settings as well, both in-flight, and on the ground.
In boosted engines, maximum manifold pressure is determined by the strength of the engine, detonation limitations, compression ratio, the integrity of the induction system, system component temperature limits, the fuel being used, and other such factors. Generally boosted engines reach maximum pressure limits between 35" and 45" Hg, but may be as high as 70" in some cases. Generally detonation becomes a factor at higher manifold pressure settings, because higher pressures reach an explosive point sooner on the compression stroke, and can lead to uncontrolled flame fronts in the combustion chamber. What that means to us as pilots is that at higher MP settings, the potential for damage to the engine exists.
Aircraft operating at high power settings for takeoff usually use an additive called Anti-Detonation Fluid, or ADI. This is typically a mixture of water, glycol, and isopropyl alcohol. It serves to suppress detonation at high power settings for takeoff, and is typically found on older aircraft engines only (common on 2800, 3350, 4360, etc).
It's important to remember that Manifold Pressure does NOT give you an indication of cylinder pressure, but only the pressure created by suction (or by boost) in the intake manifold. It's also important to remember that useful information about the health of the engine, and especially the induction system itself, may be gained by monitoring both the high and low end of the manifold pressure.
It's also worth noting that the reason you will see a drop in manifold pressure as carb ice is formed, is that the air inlet to the induction system is being occluded by ice, much in the same way that one might progressively put fingers over the open end of the vacum. Pressure begins to drop. As airflow is restricted through the venturi, fuel flow is reduced, power is reduced and eventually the engine either quits due to lack of air, or lack of fuel.
Here you go dude - Here's some more info to go with avbugs response. This is an article (part of a longer series that covers more then just MP) that should answer all your questions. It's a great series to read to get a real good understanding of it all!