Have you ever seen a phone display a name or number when it rings? That's called caller ID. It's like a little message from the person calling you that tells you who they are so you can decide whether or not to answer the phone.
But how does your phone know who's calling? Well, when someone makes a call to your phone, they send a signal that includes their phone number. Your phone receives that signal and uses it to show you the caller's name or number on the screen.
Sometimes, people might not want their number to show up on someone else's phone. So they can choose to "block" their number, which means their phone number won't show up on the other person's caller ID screen.
That's pretty much all there is to caller ID. It's a simple way for you to know who's calling you before you answer the phone.