In 1915, Albert Einstein first proposed his theory of special relativity. Essentially, this theory proposes the universe we live in includes 4 dimensions, the first three being what we know as space, and the fourth being spacetime, which is a dimension where time and space are inextricably linked. According to Einstein, two people observing the same event in the same way could perceive the singular event occurring at two different times, depending upon their distance from the event in question. These types of differences arise from the time it takes for light to travel through space. Since light does travel at a finite and ever-constant speed, an observer from a more distant point will perceive an event as occurring later in time; however, the event is "actually" occurring at the same instant in time. Thus, "time" is dependent on space.
Gravitational Time Dilation

An important aspect of Einstein's theory of relativity to note is that he proposed matter causes space to curve. If we pretend that "space" is a two-dimensional sheet, a planet place on this "sheet" would cause it to curve (see diagram below). This curvature of space results in what we perceive as gravity. Smaller objects are attracted to larger ones because they "roll" through the curved space towards the most massive objects, which cause the greatest degree of curvature. In relation to time, this curvature causes the gravitational time dilation effect. Under normal circumstances, this effect is impossible to observe. However, in the presence of the extremes of our universe (such as black holes, where a huge amount of matter is compressed into an extremely small volume), this effect becomes much more obvious. To a distant observer, an object falling into a black hole would appear to never reach it, due to time dilation causing time to "progress" extremely slower, at least relative to the distant observer (the object in question, however, would very rapidly be destroyed by the black hole).

A second aspect to the gravitational time dilation postulate is that the faster an object is moving, the slower time progresses for that object in relation to a stationary observer. While in everyday circumstances, this effect goes entirely unnoticed, it has proven to be true. An atomic clock placed on a jet airplane was shown to "tick" more slowly than an atomic clock at rest. However, even with the speeds achieved by a jet aircraft, the time dilation effect was minimal. A more solid example can be seen through an experiment performed on the International Space Station (ISS). After the first 6 months in space, the crew of the ISS aged .007 seconds less than the rest of us on earth (the relatively stationary observers). The station moves at approximately 18,000 miles per hour (see applet below to track the location and speed of the ISS), much faster than the range of normal human speeds. Even with such speeds, however, time dilation is minimal unless you approach speeds close to the speed of light (300,000 km/sec.).