The WikiPedia has a very good FAQ and Definition on 1031 Exchanges.

....also known as a like kind exchange, is a transaction under United States law which specifies that if an asset (usually some form of real estate such as land or a building) is sold and the proceeds of the sale are then reinvested in a like kind asset, then no gain or loss is recognized, allowing the deferment of capital gains taxes that would otherwise have been due on the first sale. This law is defined by section 1031 of the Internal Revenue Code.

In order to qualify for this exchange, certain rules must be followed.:

1. Both the relinquished property and the replacement property must be
   held either for investment or for productive use in a trade or
   business. A personal residence cannot be exchanged.



2. The asset must be of like kind. Real property must be exchanged for real property. Personal property must be exchanged for personal property.



3. The proceeds of the sale must be invested in a like kind asset
   within 180 days of the sale. However, the property must be identified
   within 45 days.

Frequently, the most difficult component of a 1031 exchange is
identifying a replacement property within the first 45 days following
the sale of the relinquished property. The IRS is strict in not
allowing extensions........