If you put on a stereo recording in which two similar but not-quite-identical frequencies are played so that one frequency plays in one ear and the other frequency plays in the other, your brain will try to sync them up so they match perfectly. In doing so, it will create a third beat on its own, a sound you'll actually be able to hear even though it's not on the recording.
This much is fact. Binaural beats really do exist. The question is whether they do what some people claim they do, such as encouraging lucid dreaming, opening the “third eye,” or inducing meditative states. So far, the evidence on this question is purely anecdotal. Some people swear by them, but there haven't been any studies to actually prove that they work this way.
The idea is that binaural beats can stimulate the types of brain waves associated with specific mental states. For instance, binaural beats in the 7-13 Hz range are supposed to encourage dream-like Alpha waves, while beats in the range of 4-7 Hz encourage Theta brain-waves, which are associated with meditation. It is true that meditation is correlated with Theta waves. However, this does not prove that the production of Theta waves is equivalent on its own to a meditative state. The brain is a lot more complicated than that.
In the absence of evidence, the only thing left to do is to try it out for yourself. Here's a New Age music/meditation track featuring binaural beats!