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The 802.11 standard defines two modes of operation: Infrastructure mode, where all stations communicate through an access point, and ad-hoc mode, where stations communicate directly without the help of an intermediary. Ad-hoc mode can be useful for temporary peer-to-peer applications, such as when two laptop users want to exchange files over Wi-Fi.
Most businesses discourage use of ad-hoc mode because they prefer to enforce corporate security policy at the access point and gateway or switch connected to the access point. Users that communicate directly over ad-hoc mode essentially bypass those security measures. Ad-hoc mode can even be used as an attack method. For example, a Windows XP PC that previously associated to an access point with a given name (SSID) can be tricked into automatically re-associating in Ad-hoc mode to an attacker's laptop that advertises that SSID. You avoid this attack by configuring XP (or any other wireless client software) to associate to preferred SSIDs in infrastructure mode only.
On the other hand, several vendors are now using ad-hoc mode as the foundation for building wireless mesh networks. Mesh networks have many applications, including outdoor metropolitan networks and mobile ad-hoc networks (MANETs). To learn more about Ad-hoc mode and its use in mesh networks, visit this NIST resource page. A standard for mesh networks is now under development, designated IEEE 802.11s.
In short, ad-hoc mode has many constructive uses, but unless you have a specific reason for enabling, your safest best today is to disable ad-hoc mode to prevent unwanted or risky associations.
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