Extrinsic motivation comes in the form of reward or punishment. Although it can be physical things, such as money, it can also be an emotional motivation, like a compliment or a threat.
The difference between intrinsic and extrinsic motivation isn't always obvious. For example, look at a situation where a student consistently gets good grades. At first glance, it would appear the student is extrinsically motivated because of the reward of good grades. This may not be the only form of motivation going on, however. If the same student is also interested in learning, then the interest in learning is intrinsic, which means that the student is motivated by both intrinsic and extrinsic forces.
Extrinsic motivation is important because motivated employees and students tend to be more productive and energetic. This productivity comes easiest when the motivation is intrinsic, but it's not always possible for someone to be internally motivated about everything. This is where extrinsic motivation becomes valuable. Consider the high GPA student again. He absolutely loves English class, but hates math class. In math class, he loses the intrinsic motivation (interest), but the extrinsic motivation (good grades) allows him to be productive in math as well.