CHMOD stands for CHange MODe and is a command used on Unix/Linux systems to set access permissions on files and directories (a directory is a folder, the term folder was introduced with Windows 95).
Some FTP Client programs, such as WS_FTP for example, allow you to change the CHMOD of files/directories. This is done in WS_FTP by first connecting to the remote server and then right clicking a directory/file in the right window and then selecting 'Operations' from the popup menu you then select 'FTP Commands' and then 'CHMOD(unix)' which then display a dialogue box where you set the actual permissions on the selected file/directory.
For example a typical CHMOD requirement for eXtreme Styles Mod is for the 'cache' directory to be set to: 777.
FTP client - search results on google can be found here
Important: Users using free phpBB hosting, WILL NOT have FTP access and therefore cannot alter the CHMOD settings on the files/directories.