This variable is the equivalent of the PATH environment variable for Emacs. It contains a list of directories Emacs will search for executables.
Here’s an example of appending the /sw/bin directory to the exec-path and PATH variables (useful for Mac OS X users running LaTeX):
(setenv "PATH" (concat (getenv "PATH") ":/sw/bin"))
(setq exec-path (append exec-path '("/sw/bin")))