Lure modules are items that can be purchased from the in game store. You will also receive a free lure module when your Pokemon trainer reachs level 8. The lure module works like incense does, but is far more effective in luring Pokemon, but also comes with some limitations that make it a little more limited in where it can be deployed.
You can attach a lure module to any PokeStop that you find. Once you do this, Pokemon will be lured to this location for the next 30 minutes. An advantage of using this is that all other players in this area will also receive the same bonus for the next 30 minutes, which can make it a great item to use with friends if you both work together to take advantage of this shared bonus.