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Racial profiling is a process by which individuals are targeted for special attention, often by law enforcement or similar officials, because of their perceived membership in a particular racial group. As such, it is a form of racism.
Use in law enforcement
A classic example of racial profiling is its use in law enforcement: for example, if a suspect of a robbery is caught on security camera as being white, police investigators can rule out any non-white people as possible suspects.
This in itself isn't a bad thing; it's simply normal police work. Where it gets controversial is when investigators begin to stop and question anyone who might match the race (and, hopefully, gender) of the suspect, regardless of any other possible factors such as height, weight, build, clothing, hair color, tattoos, hats, the car they're driving, etc. Arresting someone based on this factor alone can get an investigator in hot water, and has in the past.
Another more frequent type of racial profiling in law enforcement is being selective in which laws to enforce upon whom. For example, if a patrol car is sitting on the side of the highway clocking speeders, the occupants might choose to let a few white people speed on by, but then stop every black driver they see who might be driving even slightly over the limit. This is more of a form of racism than racial profiling. Some may try to justify their actions by stating that their chances of pulling over a DUI, a stolen car, or a car full of drugs and illegal firearms are greater if they select their pulls based on race. This has led to some people claiming that the reason they got caught or given a bullshit ticket was that they were DWB ("driving while black") or DWM ("driving while Mexican (Hispanic)").
Note that unjustified racial discrepancy in stops, even where it exists, doesn't necessarily mean the officer has an explicit or even conscious hatred or dislike of the person they are stopping. It is possible for a person, disproportionately critical of people of color, to have no idea that they are doing it. You don't have to consciously dislike a racial group or think it is inferior in order to treat them differently. This bias blind spot actually makes it extremely difficult to deal with individual instances of discrimination, as the discriminating person may strongly believe they would never act in such a way.
Similarly, police in New York City are allowed to do a "stop and frisk" to damn near anyone they might come across, regardless of whether an investigation is going on — a practice which unsurprisingly favors whites over minorities; indeed, the number of stop and frisks performed on black men surpasses New York City's black male population. As you can imagine, the ACLU is up in arms trying to stop this practice.
Some otherwise legitimate criticism of excessive airport security (when coming from those on the right) has been marred by suggestions that the TSA should instead be actively profiling and subjecting those of Middle Eastern appearance for additional scrutiny.
Immigration in the United States
Never mind that not all illegal immigrants are brown — some states along the southern border have attempted to enact laws that allow law enforcement to ask anyone for proof of identity or proof of residency in order to determine citizen status — again, regardless of whether an investigation is going on. Thus, many Latino citizens of states such as Arizona are subjected to unnecessary identification checks.
- There is a hilarious West Wing episode about this.