The example I'm going to use in this post is what's called an ND-grad filter.
ND = neutral density which means that it should not put any additional colours in the shot as the filter is grey. But what it does do is cut out the amount of light reaching the lens. I've spoken about my ND10 before which cuts out 99.9% light allowing very long exposures even in bright conditions.
Grad = graduated, which means only half the filter is grey. The reason for this is that when shooting landscapes the sky is often brighter than the land. The ND grad filter blocks out some of the light from the sky but not the land and this balances the shot to allow for a better exposure of both foreground and sky.
This shot was taken today with the ND10 filter in place. It's straight out of camera with no photoshop work (except to make it a small file). The ND10 has allowed an 8 second exposure in the middle of the day and because of this the sea has flattened out and become smooth. However, you can see how bright the sky is and there is not much detail there since it is over-exposed. I could shorten the exposure time but that might then make the rocks too dark.This is where the ND-grad filter comes in.
If we take the same shot again but with the ND-grad filter on the lens as well as the ND10 (filters can be stacked on top of each other to give multiple effects) you get a solution to the problem.
This is exactly the same shot, again without any tinkering in photoshop. Immediately, you can see how the sky has now been darkened to match the foreground. Quite a difference and certainly less trouble for the camera to distinguish between bright and dark areas. Filters have been around for ages and although programs like photoshop can "fix" many digital pictures now it is still important to get the shot as correct as possible in-camera as that means less work afterwards.
Anyway, hope that gives you a bit of an insight into graduated filters. They are quite good fun especially the coloured ones but that's for another post.
