Clip is a geoprocessing tool in ArcGIS that trims or cuts out features of one geographic layer (input features) that fall within the boundaries of another geographic layer (clip features). Essentially, you’re “clipping” the input layer to the shape of the clip layer, similar to how you might use a cookie cutter to cut out shapes from a sheet of cookie dough.
For example, if you had a land use layer for an entire county that you only wanted information for a particular city, you would use clip analysis to crop the extent of the layer by using the geographic layer of the city. The resulting dataset would be land use for the city of interest.
The video tutorial below demonstrates how to use clip analysis using ArcGIS 9.2. The video is 6:46 minutes long.