Micromanaging is a skill that takes many players a very long time to master. A player skilled at micromanaging can often take on a lesser player head-on and not lose a single unit, simply by moving them as they are damaged.
Micromanaging can be as complicated as trapping enemy heroes, targeting enemy spellcasters and casting hero spells all at once, or as simple as attack-moving instead of right-clicking when you move your units. As an example, imagine playing Undead. You are sending your Dread Lord out with five Ghouls that have learned Cannibalize. You face a level 7 creep paired with two level 4 creeps. Without micromanagement you would probably be left without any Ghouls or a hero by the time the creeps are done with you. On the other hand, by having the creeps chase a single Ghoul around in circles as they are attacked, you can minimize damage done to your forces. This is time consuming but can often make or break a battle.
Aside from running away from the enemy, micromanagement can also be used offensively. For instance, trapping an opposing hero with your Ghouls can prevent him from escaping, leading to his death. Targeting specific units is also considered micromanagement, I believe; targeting single enemies with groups of your units may prove to be more effective than having every unit of yours attacking an enemy at random.
Geez, I could go on for days about micromanagement... maybe someone wrote a micromanaging guide somewhere.