Steric effects arise from a fact that each atom within a molecule occupies a certain amount of space. If atoms are brought too close together, there is an associated cost in energy due to overlapping electron clouds (Pauli or Exchange interaction, or Born repulsion), and this may affect the molecule's preferred shape (conformation) and reactivity.
Steric hindrance occurs when the large size of groups within a molecule prevents chemical reactions that are observed in related molecules with smaller groups. Although steric hindrance is sometimes a problem (it prevents SN2 reactions with tertiary substrates from taking place), it can also be a very useful tool, and is often exploited by chemists to change the reactivity pattern of a molecule by stopping unwanted side-reactions (steric protection) or by leading to a preference for one stereochemical reaction course as in diastereoselectivity. Steric hindrance between adjacent groups can also restrict torsional bond angles. However, hyperconjugation has been suggested as an explanation for the preference of the staggered conformation of ethane because the steric hindrance of the small hydrogen atom is far too small. This is the effect responsible for the observed shape of rotaxanes.
When a Lewis acid and Lewis base cannot combine due to steric hindrance, they are said to form a frustrated Lewis pair.