What is a rollback?
A rollback reverts a post back to a previous version in the edit history. The rollback action itself then appears as the most recent item in the edit history.
A rollback also clears any spam and "rude or abusive" flags that have been set on a question. For example, if the post originally had two spam flags, was edited, received one more spam flag, then the edit was rolled back, the last spam flag will be cleared, leaving the first two.
How do I rollback a post?
You can find the the rollback button in the revisions page:
If you don't have enough reputation to edit the post, you won't see the button. Also, there is no 5-minute grace period for rollbacks (i.e. any edits you make after the rollback will create a new revision, and not fold them into the rollback revision.)
How do rollbacks look like in the edit history?
Here's an example of what an edit history with a number of rollbacks looks like: