Code pool is a concept to pull the code in Magento structured format. It is specified when you register new module in app/etc/modules/Company_Module.xml

There are 3 codePools in Magento: core, community and local, which reside at app/code/ directory.

CodePools:

_community: It is generally used by 3rd party extensions.

_core: It is used by Magento core team.

_local: Local codePool should be used for in-hour module development and overriding of core and community modules for custom requirement.

Residing directory:

_app

_code

So in short, you can say that codePool helps Magento to locate module inside app/code/ for processing