Intarsia is the term used to identify a knitting project using blocks of color where the yarn is not stranded or carried across the back of the work as is done in Fair Isle knitting, also known as stranded knitting.
Intarsia is actually a term that comes from woodworking, where it refers to inlaying different colors of wood to make a pattern, design or picture.
Intarsia is not any more difficult than straight knitting, at least in it's most basic form. It requires small balls, bobbins or long strands of yarn be used for each block of color.
When you get to the end of working with one color in the row you are on, you simply drop the color you were using and pick up the next color. Always pick up the new yarn from underneath the old yarn to prevent holes in your project.
Intarsia gives a cleaner and less bulky look to the back of projects knitted in this manner. The main potential difficulty with this type of knitting is getting your yarns tangled; using bobbins can help prevent this because the bobbins prevent too much yarn from being loose at any given time.
If you're new to intarisa, try the intarsia apron, a small, easy two-color intarsia project.
