By "coregistration" SPM means intra-subject coregistration - i.e. matching images from the same subject that may be in different orientations, modalities, or acquired in different scanning sessions.
In FMRI preprocessing, this is usually the process of matching the position of the structural and functional (EPI) scans. You will want to do this if you want to display activation on the structural scans for the individual subjects, or you want to use the structural scans to do the spatial normalization. If the structural was collected in a different run, or the images are not already automatically put in register using the information from the scanner orientation, you may need to set the orientation of the structural scan to match the SPM template, using the same method as described elsewhere for the functional scans.
In SPM2 and SPM5, the default method of coregistration is Mutual Information, which is what we want. First click Coregister. Choose the number of subjects (maybe 1 here), and Coregister. Select the target image as the mean image from the realignment. Select the structural scan as the "Source image", and just click "Done" without selecting any images for "other images". The coregistration runs, and leaves a display in the SPM graphics window in which you can click on the structural and functional images to check that their outlines match OK.
Please note: If you selected "Coregister and Reslice", it will also create a new version of the structural image, with an r prepended to the filename, and with the same voxel size as the EPI. You should only use the resliced structural for rough display purposes, as it is lower resolution than the original due to the larger voxel sizes of the EPI. Use the original structural within SPM, because SPM will take account of the coregistration, as it is encoded in the image .mat file.