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harish,
You should log in to your account and click on the Help & Training window in the upper right corner for the full details. In summary, validation rules allow administrators to create custom business logic that will be enforced by the system on the users. For example, you might wish to ensure that a percentage field can never have a value over 100%, or that a currency field may never have a value less than $0. They are used to extend the standard validation logic that is provided at the system level (required fields, validated numeric input, and so on).