Short for "Inter-Quake Model". It is (or was?) intended as a replacement for MD5 and SMD skeletal animation formats. It was used in Cube 2: Sauerbraten.
If you want to read a bit more about it:
http://sauerbraten.org/iqm/
Anyway, I don't think it's a relevant feature for the average Quake player, rather a feature to cover all bases.