Damping affects origin motion and zoom, as well as global parameters: it makes them more fluid, but less precise. Damping acts like a low-pass filter: it reduces the high-frequency components (jerkiness) of motions, making them smoother. Damping ranges from 0 (none) to nearly 100 (maximum). Note that when damping is set to its maximum value, the origin and zoom respond to changes very slowly, and may appear to be stuck.
Damping can be changed via the Master dialog, MIDI, or the mouse wheel. It can be also be changed via Image/Damping/More (Up Arrow) and Image/Damping/Less (Down Arrow); the arrow shortcuts are handy if the mouse has no wheel.