X windowing system
X -- you may see it refered to as X11, X11R6, or the X windowing system -- is what most unixes use for their graphical user interface (GUI). It works on a client-server model, meaning that you have an X server on your system, and also a client that connects to it. It can be (and usually is) a real pain to setup if you haven't done it before and don't know the specifics of the system that you're configuring it on. You can install it from ports (or as a package) after you've installed your main system or right at the install stage. As a general rule, it's not installed on servers. The main reasons for this being that a) it's a network-aware app and as such can be a security risk and b) most servers don't need it, and it'll just go unused and take up disk space that can be used for other programs or data. If you're interested in controlling a server via a GUI, check out the webmin package in ports.
The X11 software has been deprecated due to lack of updates and licensing issues and has been replaced with the nearly identical (in use) X.org. See http://www.x.org/ and http://freedesktop.org for more information
That said, FreeBSD's use as a desktop OS is certainly made much friendlier by the use of the X windowing system. X windows does not give you a pretty GUI all by itself, rather it gives you the ability to run other window managers and desktops (see gnome, KDE, xfce, blackbox and windowmaker for examples of these).
See also: Configuring_X