Pages is the word processing and page layout app in iWork. One of the great advantages of iWork is that when the people at Apple started work on it, they had already learned from AppleWorks and from all the other applications that have been developed over the last quarter century (yes, that's how long we've had personal computers!). When it comes to documents, people sometimes want word processing documents where the software takes care of page numbering and page breaks, but sometimes they want to design individual pages such as flyers or posters.
iWork addresses this issue with a single application -- Pages -- that can handle both types of design. Many features are common to both, but you have the ability to work in either a page layout or a word processing document. No more do you have to worry about things moving in your carefully prepared layout -- they only move when you move them. But if you're in word processing, you don't have to worry about page breaks not happening when and where they should -- that's automatic.
Both types of documents are described in detail in iWork '09 for Dummies.