The headset is the bearing system that allows your handlebars to turn smoothly on your bike. A headset in clean, lubricated working order is essential for the smooth steering and handling.
Headsets come in different sizes and are either external to the frame or internal. Commonly used terms are external, semi integrated and integrated headsets. A good upgrade is to change your headset for a sealed bearing unit, which offers improved durability and much better weather seals as many bikes come fitted with loose bearings systems from new. These work well but can require frequent attention to keep them working at their best. Brands such as Hope, FSA, Ritchey and Cane Creek offer some of the best sealed units available with prices starting from around £15 going up to £00s with the likes of Chris King for that really high end offering. The headset is one of the many components that are made in various colours as most brands use an alloy bearing cup these are anodized in many colours for that customized look.
Most headsets today are a-head or threadless. This means that the fork steerer slides through the headset rather than threading onto it. Most brands have used this system on bike over £200 as they are quicker to install and work and last better than the threaded style.