Chipset: A number of integrated circuits ("chips") designed to perform one or more related functions that connect the CPU with the rest of the system. The chipset manages the core functionality of a motherboard and commonly refers to the two large chips on the motherboard besides the CPU. These two chips are called the Northbridge and the Southbridge, both acting as traffic regulators in the data flow. Usually these two chips are covered by heatsinks to help cool them.
The Northbridge primarily handles memory operations between the CPU and the rest of the motherboard. This includes data flows between CPU, the system memory (RAM), the video card and the Southbridge chip. It is also called the Memory Controller Hub (MCH). Nowadays it is very common for the Northbridge chip to have an integrated graphics processor (IGP), removing the need for a dedicated video card for most daily computer use.
The Southbridge microprocessor takes care of the slower data flow between the Northbridge and peripherals and connections. This includes external connections (keyboard, mouse, USB, etc.), power management, audio, storage (IDE, SATA, FireWire, etc.), networking and bus protocols such as PCI and PCIe (excluding the video card). The Southbridge is also known as the Input/Output Controller Hub (ICH).
Some CPUs (AMD64, Intel Nehalem) now have eliminated the Northbridge by integrating its functions into the CPU itself for increased performance, leaving only the Southbridge on the motherboard.
Courtesy of the French Energy Agency ADEME, Future Electronics project. Expanded by VHK.