Overclocking is the process of running your CPU or GPU at speeds higher than it's advertised to run at. Faster speeds mean more cycles per second, means more operations or instructions processed. In short, it can do more in less time essentially. Drawbacks include overheating mostly. If you don't have the proper cooling in place, you could damage the CPU/GPU. I personally don't overclock because I don't ever feel like there's a need for it. If you don't know what you're doing, I'd avoid messing with it...

long story short
when you build a cpu or gpu there is an inherent limit
either it's just unstable (nevermind why in this context) or runs too hot - would require average user to replace average cooling for something more ridiculous and expensive for performance gain they would most likely not notice
so for this specific model / product the limit is set so that hopefully 100% of units will be able to work with
naturally if you have a thing that has a spectrum of functionality, and you start with the lowest common denominator, it means that on average some of the units are able to go faster and a few decently faster
but then you need to buy fancier cooling and in general depending on the degree of overclock in can get more involved
and there is a risk that something might go wrong - especially since you are directly messing with power and you can break stuff
usually for an average person (even if he knew exactly how) added costs (better cooling) and potential instability is not worth 5% gains they might not even notice

The "clock cycle" is every time your computer decides to do something. You can make that happen more times. It was designed to run as many times as it is before you overclock. Making it do more times puts more electricity in it than it is designed to have. More electricity can make it run hotter and damage the chip.

Old computers ran on quarts crystals that vibrated at a certain amount of times per second, also known as a frequency, or hertz.

So, your computer probably has like a 3 Ghz (giga hertz) processor, that means it wakes up, thinks, and shuts down 3000000000 times per second. If your computer woke up 3050000000 times per second, then 50000000 additional "tasks" get completed every second. Remember that tasks are VERY small, like, moving a window on the screen is probably hundreds or thousands of tasks.

Imagine your brain needs to continually break down tasks into really short instructions in order to preform those tasks and has to run them in order. Something like picking up a ball would take, say 100 of these instructions but your brain is capable of belting out 200 of them a second. Now let's say that your brain is special and you are capable of boosting that number up to 220 with virtually no loss. You can now preform tasks up to 10% faster. Now let's say your brain gets a little bit hotter with every instruction and your sweat glands are just bairly keeping up so you install a fan to keep you cooler.also, you are burning more calories and need to eat more. You think your brain can handle more now so you make it up to 230 instructions per second but it turns out your brain occasionally makes mistakes. Usually this isn't a problem because the mistakes are minor and easily fixable but pushing your brain past its limits causes way more problems than it can handle and it starts to fail entire tasks. You essentially have to choose if you can function like this or roll back to a lower number.

TLDR: higher clock = better performance + more heat + higher power consumption + more fuckey wuckeys

TL;DR: Overclocking = speeding up your computer's heartbeat; more energy and more blood through the system, but just like working out it creates a lot of waste heat and strain that can cause your system to burn out faster just like humans with a heat stroke

###Some Background

Every part in a computer is rated for performance within certain specifications: what's "safe" to run at. In engineering we have what's called margins of error which is basically in this case, what is the voltage/temperature we can operate safely at without causing unnecessary wear and tear to the machine or failure.

The margin is the line on the performance graph where failure rate starts to increase dramatically against the operating temperature or whatever you're rating. You usually go with a rated margin of error well below the theoretical margin of error so that even if things go wrong, your computer won't explode or have a "catastrophic failure" (unrecoverable or dangerous).

As such, the manufacturers advertise a speed that is well below that margin of error so that consumers won't complain and inundate their RMAs / support lines and their devices won't be known as cheap, defective, and/or die quickly. Laptops are notorious for "underclocking" due to rapid overheating and the difficulty of cooling them because of the small confined space the chips are in.

###CPU/GPU Connection

CPUs/GPUs produce a lot of heat. This heat can damage both themselves as well as anything close to it especially with repeated heating/cooling. The result is heat stress/wear.

Anyways, because of how precautious these manufacturers / sellers are, you can usually safely go beyond these margins and be fine, particularly when you have good cooling in place and heat dissipation (like heat sinks -- pieces of highly heat conductive metal that spreads out the heat so it cools faster)

This is because when rating you usually assume the worst circumstances (like a very poorly constructed computer with bad airflow and low heat dissipation). They don't use high end gaming PCs with liquid cooling pumps or Noctua fans and lots of heat sinks. They're rating for their target consumer, the business employees who won't use most of that or won't experience long periods of high load (like that of high graphics gaming or video encoding)

###The Process of Overclocking & Consequences

To overclock we are basically just allowing more voltage through our CPU/GPU to make it run faster (with more **clock** cycles -- think of it as a heartbeat for a CPU, when it needs more blood for more stressful performance, the heartbeat speeds up and more energy/heat is wasted)

However, unlike humans, computers can't regrow or repair tissue. Stressful activity for us causes strain on cells and we need to rest to heal them. Computers can't do that. So it can affect the longevity if you take it beyond the rated margins because of that increased wear and tear.

When they make chips, there are always imperfections in the silicon which are used into making them. For example, when they make a cpu that is going to run at 4 GHZ, they design it to run at 4.2 GHZ, so if a chip is imperfect and it can only run at 4.1, then it's not wasted. They simply lock all chips to 4GHZ. Overclocking is when you attempt to unlock the CPU to work at its maximum frequency. So if your chip can run at 4.1 GHZ, you get the 4.1 GHZ instead of the locked 4 GHZ.

There is way more to the story but this is basically one way to look at it. I remember that people used to actually overclock the number of cores. If you bought a 4 core CPU, It could be overclocked to 5. but that's another story.

Yes, It makes your computer faster.

Consequences? If done right, nah, just shortens its life span by a bit.