A hokou is China's registration system, originating in ancient Chinese culture for tax purposes. In modern day China, governmental officials use a hokou to maintain records of birth and parental information. A hokou is determined by an individuals place of birth. Without the proper documentation from a persons place of birth, it is difficult to gain employment, find a place to live, seek socialized medical care, or send children to school. The Chinese government grants permission to move outside one's original hokou which is typically the result of bribery.
Some estimates indicate over 200 million of China's residence are affected as migrants living in different regions of the country. This is largely a result of the Chinese economy opening up over the last decade. Some parallel this group of persons to illegal immigrants in the United States. This particular group is called "floaters."
In the early 1980's, a persons hokou was so restrictive, it bound them to the small area they were born. If they traveled to another location, they were not allowed to do things like purchase food with regular currency. Instead you were required to purchase "Liangpio" or govermental currency to use during your travels. If they moved, they were not allowed to work or live in another location. There was no point in migrating from their original place of birth.
After 2003, a person could no longer be stopped on the street and asked for an identification card when visiting another city. People were detained for not producing the correct documentation, so the system has relaxed for people visiting other areas.
Related articles
http://www.foreignpolicy.com/articles/2010/03/05/the_princeling_and_the_paupers?page=0,1
http://home.wangjianshuo.com/archives/20060610_hukou_system_in_china.htm
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