A Low-K dielectric is one with a small dielectric constant. In digital circuits, insulating dielectrics separate the conducting parts (wire interconnects and transistors) from one another. To make higher-speed chips, the transistors must be placed closer and closer together, and thus the insulating layer becomes thinner. This leads to charge build up and crosstalk, adversely affecting the performance of the chip.
Low-K dielectrics have very low dielectric constants, reducing parasitic capacitance and enabling faster switching speeds and lower heat dissipation.
The K refers to the dielectric constant. For example the dielectric constant of SiO2, the insulating material used in silicon chips, is 3.9. By doping it with fluorine to produce fluorinated silica glass, this is lowered to 3.5. Another approach is to make a porous dielectric. The pores lead to a smaller average dielectric constant.
References