A washer is a thin plate with a circular hole in the center. Washers are used to distribute the load of a threaded fastener, such as a bolt or nut. Before a screw or bolt is driven into a surface, a washer may be placed in order to prevent looseness and provide protection.
Without a washer, a screw can damage the joint's bearing surface when its threads dig into the material during tightening. Screw washers distribute the load. This is especially necessary when you're driving into a soft material, such as wood or aluminium, which is vulnerable to stress-related damage.
If you are fastening pieces of lumber together you will want to put washers on both the nut and bolt head sides. Otherwise as was pointed out it generally goes inside of the nut, outside of and against the fastened piece.
