A gift card is a voucher worth a specific amount of money in the store it was purchased for. You redeem the card for the value of that card when you purchase products.
Apple has two kinds of gift cards. The Apple Store gift card is for purchasing physical products from Apple, and is redeemed at purchase time.
The other cards are for digital online products. They can be called iTunes, iBooks or App Store gift cards. They all work the same way and can be used to purchase any product in any of the digital content stores that apple provides for you iOS devices. The cards are redeemed in one of the stores' apps and will give you a positive balance (credit) that you can then use to purchase products. It does not matter which store you use to redeem the card, the credit can be used in any of the stores regardless of what store the card is named after.
The physical card itself is not necessary. It is the code on the card that is needed. Most of the store apps (iTunes, iBooks, App Store) have a redeem link at the bottom of the main (first) tab. Your current (positive) balance should also show somewhere in that area.
The cards can be purchased directly from Apple, or through any number of third party retailers; often near the checkout counter of electronics stores.
Apple and iTunes Gift Cards - Apple Store (U.S.)