Nu Metal is a fusion genre that mixes metal with funk, hip hop, and sometimes Industrial. They're often groove-based and they're guitar and bass is usually tuned very low.
In the late 90s Korn's "Follow The Leader" had gained a massive amount of popular and featured the hit singles Freak on a Leash and Got The Life. This album opened the door for many Nu Metal and Rap Metal bands to become popular. In 1999 Korn's Issues, Limp Bizkit's Significant Other, and Kid Rock's Devil Without a Cause were extremely succesful.
2000 and 2001 was possibly the best time for Nu Metal with Limp Bizkit, Slipknot, Deftones, System of a Down, Disturbed, Godsmack, Staind, Drowning Pool, Static-X, Mudvayne, P.O.D., Mushroomhead, Papa Roach, Soulfly, and Linkin Park (who's debut was the highest selling album of 2001) all having succesful albums.
2002 showed signs of Nu Metal declining. Korn's long awaited 5th album Untouchables and Papa Roach's Lovehatetragedy both sold less than expected.
Some of the reasons behind this is MTV started focusing more on Pop-Punk and Emo-Pop in 2002.
Even though many of these bands have gained criticism Deftones and System of a Down are highly respected among critics and rock fans in general.
Korn are often considered the pioneers of this style of music.
Dan - What is Nu Metal
John - It's basically grooved-based, aggresive modern hard rock. Despite popular belief you do not have to have some sort of rap/hip hop influence to be Nu Metal.