Digital Certificates and PSK - Pre-shared Key guide
PSK or Pre-shared Key
PSK is a key both peers use to identify themselves to each other. If one pre-shared key is different from the other, then the authentication will not be successful. In a real world scenario you would specify this on a VPN Gateway at one site, such as a firewall with VPN capabilities and then specify the exact same key on the other site’s VPN Firewall. So it is a way for a device to prove it is authorised by providing a pre-shared key identical to the opposite peer in negotiation.
Pre shared keys are easier to configure than digital certificates, and are typically used for small to medium sized businesses that require a VPN connection. You would usually communicate a pre-shared key via the phone or in person so that it is not captured by anyone such as a hacker sniffing the network.
You would then specify your pre-shared key within your VPN configurations, and do the same at the peer end. A VPN gateway should use long Pre-shared keys to eliminate chances of being hacked, 10 plus characters is recommended. For large networks though, digital certificates should be implemented over pre-shared keys as digital certificates are scalable.
Also see PKI
Wikipedia's guide to Pre-shared Key