Normalization is the process of organizing data in a database. This includes creating tables and establishing relationships between those tables according to rules designed both to protect the data and to make the database more flexible by eliminating redundancy and inconsistent dependency.
Redundant data wastes disk space and creates maintenance problems. If data that exists in more than one place must be changed, the data must be changed in exactly the same way in all locations. A customer address change is much easier to implement if that data is stored only in the Customers table and nowhere else in the database.
What is an "inconsistent dependency"? While it is intuitive for a user to look in the Customers table for the address of a particular customer, it may not make sense to look there for the salary of the employee who calls on that customer. The employee's salary is related to, or dependent on, the employee and thus should be moved to the Employees table. Inconsistent dependencies can make data difficult to access because the path to find the data may be missing or broken.
following links can be useful:
http://support.microsoft.com/kb/283878
http://neerajtripathi.wordpress.com/2010/01/12/normalization-of-data-base/