Tax-loss harvesting is the action you take to dump your investment losses in order to offset your capital gains tax liability. In employing tax-loss harvesting, you are also able to avoid recognizing short-term capital gains and shift to long-term capital gains. Why would you want to do that? It's simple. For the average american (in the 31.5% tax bracket) the long-term capital gains tax rate is 15%, and the short term capital gains tax rate is approximately 33%.
Don't know which tax bracket you're in. Check out this link: http://www.bankrate.com/calculators/tax-planning/quick-tax-rate-calculator.aspx