Associations is a way to tell the system that a particular file extension (.txt or .htm or .java) are to be associated with certain actions. E.g., if you click on a file whose extension is .txt, you presumably want an editor. For instance, I associate .txt with the GVIM editor (a GUI version of vi). Similarly, .htm is assocated with my Netscape browser and .java with my java compiler.
To find your current list of associations, open an folder, choose the View menu ==> Folder Options. Then click the "File Types" tab. You can modify an existing association by clicking "Edit". This gives a new window with (1) a list of actions (open, print, edit, etc) and several options ("New", "Edit", "Remove", etc)
E.g. For .txt files in my WinNT machine, the current "open" and "edit" action uses the "Notepad" editor. This action specification says this: