Open Source Hardware (OSHW) is a thing - a physical artifact, either electrical or mechanical - whose design information is available to, and usable by, the public in a way that allows anyone to make, modify, distribute, and use that thing (credit to the TAPR license authors for this definition).
In other words, open source hardware is something you can touch, feel, and/or interact with that is open for public use. Under the requirements of specific licenses, hardware that is made open source is available for distribution, modification, and personal use. Open source hardware allows a designer to create a product based on prior projects done by other individuals or companies, thus enhancing and improving new products based on previous designs.
In order to release files as open source hardware, you must choose between a number of different licenses, based on your requirements and needs. Unlike open source software, these licenses have yet to mature and there is not an obvious consensus on the best choices. There is a good discussion on Wikipedia about the fundamental differences between open source software and hardware licenses. OpenXC projects tend to use Creative Commons copyright, although this isn't strictly an open source license.
Designing for Open Source
Open source hardware is all about accessibility. The easiest way to think about open source hardware is as a building block. Rather than start by making the foundation of a product, open source hardware allows a designer to begin at a higher level in order to make a better product. Open source hardware generally consists of 3 main components: