A folio is a field used to identify specific running workflow processes. It is completely in your control as the workflow designer to define what the folio should look like - it doesn't even have to be a unique value but it is helpful if it is as it makes it easier to find specific process instances when using the K2 Management tools.
How you use folio depends on your workflow. For many of mine, I have an underlying database record related to each running workflow process so I use that record's ID as the folio so I can easily tie the two together.

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The best analogy is it like the subject line of an email.  Put something descriptive to the users in there so they can quickly grasp the topic when they see it in the task list or other places where workflows are displayed.  

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