Storytelling is one of the oldest human traditions. Throughout the ages, people have been telling stories; through oral histories, written text, or more recently, using multimedia. Storytelling is an excellent vehicle for teaching others. This video from Apple Learning Interchange explains why storytelling is a good learning tool.
Storytelling naturally lends itself to a combination of audio, images, and/or video. Digital storytelling is a term used to describe a wide variety of uses of audio, images, and/or video to tell a story. The magic of the story comes from the storyteller, not the technology. A teacher, Mark Nichols, explains the power of digital storytelling.
For excellent examples of digital stories, explore the Living Memories exhibit at Digitales, and The American Experience from ALI.

For more resources on Digital Storytelling, see these resources:
Digital Storytelling - Examining the Process with Middle School Students
Jakes Online! Digital Storytelling resources