Externals is a feature of Subversion that allows links to external source repositories.
An externals definition is a mapping of a local directory to the URL -- and possibly a particular revision -- of a versioned resource.
Externals are extremely useful for working in an environment where you pull resources from multiple different repositories.
The features provided by Externals in Subversion (svn:externals) are not currently available in Mercurial (as of version 0.9.5).
It has been suggested that the Forest extension could be extended to provide this, but no known effort is underway.
The closest to what you can achieve with Subversion directories marked with the svn:externals property is Mercurial's experimental Subrepositories feature.