Chunk

Chunks are the method used by Notch to divide infinite maps in the alpha and beta releases. They are 16 blocks wide, 16 blocks long, and 128 blocks deep. When wandering the world the nearest 81 chunks are loaded, arranged in a 9 by 9 grid around the player. These chunks may have activity (mobs spawning, trees growing, water flowing, dropped items disappearing etc.), while the other world chunks are inactive, stored on your hard drive. If a player goes to an area that is beyond the already generated chunks, new chunks are generated and stored to the drive. As of the December 20th update, SMP servers tend to save chunks less often. Chunks will not save again if they were saved in the last 30 seconds.

Chunk error
A chunk error is a common error found most often in multiplayer mode. It can sometimes be seen in singleplayer, but seems to be less common. They are only client side, meaning that other users cannot see the chunk error unless under some very rare circumstances. To fix them you usually just need to re-connect to the server or reload the map. You cannot jump or fall into a chunk error but it has been reported that you sometimes might fall into a chunk error and fall into the The Void. There are also numerous reports of mobs glitching from The Void all the way to surface rapidly back and forth. Note that items dropped on a chunk error WILL fall and cannot be retrieved. Also, non-solid blocks can't flow into one.

Sometimes when you fall into a chunk error, you will be teleported back to the last second before you fall in. This will repeat until you disconnect or use a teleport command (non-modded servers use "/spawn" to teleport to the spawn).

It should be noted that while you are unable to walk into a chunk error, you are able to ride through them in a boat or minecart - provided there is a pre-existing rails. While the track will remain invisible to you, your cart will follow it. If your destination happens to be in a chunk error, simply re-connect to the server or reload the map upon arrival to avoid falling into the error and losing your minecart.

Usage of chunk errors
You may find a chunk error in which you find part of a mountain. The mountain is generally cut right down one or more sides. This is useful for finding caves and precious minerals. You should mark the surface in a memorable fashion above any interesting looking veins, caverns or dungeons before re-loading the map.

If you have a buddy on a multiplayer server with a chunk error, they are useful for guiding you from along the sides of a chunk error as they can see where you are digging. This means that your friends can point you to resources they cannot reach because of the chunk error.