Area lights are a feature of the mental ray renderer. Instead of emitting light from a point source, they emit light from a broader area around the source. Area lights create soft-edged shadows. This can help improve the realism of your rendering.
Scene rendered with area light turned off
Shadows are ray-traced.
The yellow cube indicates the light's location.
Scene rendered with area light turned on, showing soft shadows
The light in this rendering is a 2D (spot) area light.
Scene rendered with a 3D (omni) area light
The light uses the default radius of 20.0.
Note: To render soft-edged shadows, shadows must be ray-traced, not shadow-mapped. See the Render Setup Dialog 
Renderer panel Shadows & Displacement rollout.
Renderer panel Shadows & Displacement rollout. Area lights support global illumination, caustics, and other features of the mental ray renderer.
Tip: Area lights take longer to render than point lights. If you are interested in creating a quick test (or draft) rendering, you can use the Area Lights/Shadows As Points toggle to speed up your rendering. This toggle is on the Render Setup dialog Common panel Common Parameters rollout.
Common panel Common Parameters rollout.