Chastity is the quality of being chaste, a word derived from the Latin "castus", meaning "purity". In common usage, chastity describes a particular mode of sexual behavior: either complete celibacy, or participation in only "lawful" (typically, conjugal) sexual activity.
In sex magick, chastity refers to the dedication of the sexual function entirely to a particular magical formula (or set of formulae). Of course, this is simply the "lawful activity" case mentioned above as evaluated under a particular system of law, that describing the formula being worked.
Like almost any exercise of discipline and devotion, the magical application of chastity can increase the power and focus of the magician. As in all such exercises, considerable time and dedication are required to achieve satisfactory results.