A step sequencer sequences steps in a beat.
For example, if you break up a 4 bar loop that is in 4/4 time, it will have 16 beats, or steps. You can then use the step sequencer to enter the bass drum on the steps you want it to play, and enter the snare on the steps you want it to play. Then you start the step sequencer and it will play those back at the right time to give you your beat. It's basically a way to map out exactly where each drum hit should land in relation to the time of the beat.