Sector rotation is simply the overweighting of some sectors while underweighting others to take advantage of money flows moving in and out of the market.
This is important because, over time, sectors go in and out of favor. Sectors that are the best performers today won't necessarily be the best performers tomorrow, next week, next month or next year. Rotating in and out of sectors as they gain and subsequently lose momentum is a strategy intended to outperform the market over the long term.
After all, the strategy of overweighting some sectors and underweighting others is precisely what many big institutions do. And it's the billions of dollars in money flows they control that move these sectors up and down.