IPsec provides two choices of security service: Authentication Header (AH), which essentially allows authentication...
of the sender of data, and Encapsulating Security Payload (ESP), which supports both authentication of the sender and encryption of data as well. The specific information associated with each of these services is inserted into the packet in a header that follows the IP packet header. Separate key protocols can be selected, such as the ISAKMP/Oakley protocol.
Officially spelled IPsec by the IETF, the term often appears as IPSec as well as IPSEC.
(This information courtesy of Whatis.com.)