Students learn in different ways, and at any point during the course (or even an individual class meeting) levels of understanding and ability are varying. These two ideas form the reasoning behind "differentiated instruction" (sadly too long for a tag), which is commonly referred to simply as "differentiation."
The lecture-driven, teacher-centered, "sit-and-get" model of instruction does not fit within the paradigm of differentiated instruction.
Books and books are written about this, so I apologize if this is a bit reductive, but at its core differentiation from a pedagogical perspective is a student-centered approach to instruction and assessment. It's less of the students needing to learn based on how the teacher teaches and more of the teacher needing to teach based on how the students learn. The teacher adjusts based on the students, not the other way around.
In simple terms: I see it as a $10 word for what is already simply "good and effective teaching."