Book value refers to a company's actual worth as on a balance sheet, and is equal to total assets minus liabilities, preferred stock, and intangible assets such as goodwill.
It can be also defined as amount that shareholders would (in theory) receive if a company were liquidated, and all of its debts are paid off. In most cases, the book value of a company is actually less than the market capitalization of a particular company because companies are expected, generally, to grow in profit and become more profitable in the future. Usually, value investors attach a lot of importance to book value.
Book value is sometimes used in the valuation of companies which are losing money.