An aspect ratio is the ratio between the horizontal dimension and the vertical dimension. Common monitor aspect ratios are 4:3 and 5:4.
If your monitor has a 4:3 aspect ratio, then your screen resolution setting should have a similar 4:3 aspect ratio, otherwise the display will be squished and objects will appear fatter. On the other hand, if your monitor has a 5:4 aspect ratio, then pick a resolution setting which also has a 5:4 aspect ratio. The more common resolutions having a 4:3 aspect ratio are: 800x600, 1024x768, 1152x864, and 1600x1200 pixels. Resolution settings with a 5:4 aspect ratio are 1280x1024 pixels, and 1600x1280 pixels. These resolutions should not be set for monitors having a 4:3 aspect ratio. The display will be distorted.
For widescreen LCD monitors, the aspect ratio is 16:9 (or sometimes 16:10 or 15:9). Widescreen LCD displays are useful for viewing DVD movies in widescreen format, playing games and displaying multiple windows side by side.