StyleDefinitions is an option for notebooks which gives definitions for the styles that can be used in a notebook.
StyleDefinitions->"name.nb" specifies that style definitions from the notebook name.nb should be used.
The standard notebook front end comes with a selection of style definition notebooks containing styles appropriate for particular purposes.
StyleDefinitions->Notebook[... ] allows style definitions to be given explicitly.
The definition for a style named "s" is specified by the options for the first cell whose contents is StyleData["s"].
See The Mathematica Book: Section 2.10.8.
See also: ScreenStyleEnvironment, PrintingStyleEnvironment.