The Yellow light of death is used by the PS3 to indicate a hardware failure with the consoles motherboard. On the Xbox 360 this is equivalent to the 3 part Red Ring (often known as the Red Ring of Death).
There are a lot of things which can go wrong with a motherboard, and this is by no means an exhaustive list. The most common reason for Montherboard errors in Consoles is caused by overheating. Consoles have notoriously bad air flow and push their thermal limit rather regularly. This usually results in solder (a material used to connect computer components) heating to a point where it liquefies and detaches. There are many components for which losing solder is non-fatal, but many RRoD and YLoD are caused by GPU (and sometimes CPU) becoming detached as a result of this.
Because turning off your Console will cause the solder to cool (and sometimes reattach) a common solution to these problems is to increase air flow. Alternatively when solder does become detached, it does not always re-liquefy on subsequent heating. As a result some people will suggest just the opposite: decreasing the air flow. The goal here is to re-liquefy the solder to reconnect the components. Frequently a damp towel is recommended.
While neither strategy is guaranteed to fix the problem, these home remedies do have a non-trivial success rate. The only way to guarantee a fix is to either re-solder the component yourself, or send the console in for repair (where they likely will re-solder the component).