The prostate is a small heart-shaped organ which sits directly under the bladder. and encircles the urethre. Its main function is to produce the fluid part of the ejaculate. The sperm is produced in the testes. While the prostate itself does not have many nerve endings, pressure applied directly to the prostate may result in referred sensation along the urethra to the tip of the penis, which can be quite pleasurable.
The prostate is also sometimes called "The Male G-Spot." The prosate is indeed anatomically homologous to the urethral sponge in the female--the area of sensitivity know as the G-spot (it really is more of an area than a spot). While not true for all men, stimulation in this area, in conjunction with other sensual touch can produce a stronger orgasm and deeper release.