Contrast ratio is the ratio of light emitted by a full white part of the screen to that emitted by a full 'black' part of the screen. The higher the contrast ratio, the blacker the 'black' parts of the screen will look. CRT sets have the highest contrast ratio since black is when no electrons hit the phosphor; in an LCD there is still some light leakage at a 'black' pixel from the backlight.
The contrast ratio quoted is for a full white screen to a full black screen. It's a little artificial since there is normally some white in normal video content. A better ratio is called ANSI contrast, which is the ratio 8 black squares to 8 white squares arranged in a checkerboard layout. However, this is rarely used since the number is a lot lower and its more difficult to get a system with high number. You may see it quoted by projector manufacturers.
Basically, go for the highest number you can get.