Depreciation is a non-cash expense and applies to fixed assets. There are two ways to think of this:
Accounting for the normal wear-and-tear of the fixed asset as a business expense each year - it reduces the value (and future selling price); and
Claiming the cost of the fixed asset over a number of years (minor assets can be fully claimed in the year it's purchased).
This spreads the cost of a fixed asset over its useful life. It's an expense in the Profit and Loss Account which means it reduces your tax bill.