Hotfix is a file, containing fixed code, where previously was a bug. Basically, it contains updated files and SQL script. You can find hotfixes at http://devnet.kentico.com/Bugtracker/Hotfixes.aspx
Please note, you need to apply hotfix according to version of your Kentico CMS and .NET Framework. Since the hotfixes are cumulative, you need to apply the latest version only.
Every single package contains instructions is the pdf file.