extern tells the compiler that this data is defined somewhere and will be connected with the linker.
With the help of the responses here and talking to a few friends here is the practical example of a use of extern.
Example 1 - to show a pitfall:
File stdio.h:
int errno;
/* other stuff...*/
myCFile1.c:
#include <stdio.h>
Code...
myCFile2.c:
#include <stdio.h>
Code...
If myCFile1.o and myCFile2.o are linked, each of the c files have separate copies of errno. This is a problem as the same errno is supposed to be available in all linked files.
Example 2 - The fix.
File stdio.h:
extern int errno;
/* other stuff...*/
File stdio.c
int errno;
myCFile1.c:
#include <stdio.h>
Code...
myCFile2.c:
#include <stdio.h>
Code...
Now if both myCFile1.o and MyCFile2.o are linked by the linker they will both point to the same errno. Thus, solving the implementation with extern.