This is officially money for a vacation - often paid as an annual payment in one salary during the summer months, but an employee can use it for whatever they wish.

Miriam's explanation is basically correct, but I have two points to add:
1. It is most frequently translated literally as "convalescence"
2. It has become a fiction, i.e. no matter whether it is called vacation, convalescence or anything else, it is one of the benefits that have become an acceptable way to boost the employee's income. The employee is not required to use this extra money for anything in particular.

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Note added at 32 mins (2012-04-26 22:34:58 GMT)
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Having looked at the line in Miriam's response it occurs to me that there is a frequent confusion between the Demei Havraa (which are not linked to any use) and Yemei Hufsha (lit. vacation days) which are the actual days the employee may take as paid leave.

Although convalescence is a literal translation of havraah, that is not what is actually meant, since convalescence implies illness and a holiday in which to recover from it. Employees get "dmei havraah" - which I translate as "recreational vacation pay".