AFA - Simply stands for Action Figure Authority.

What AFA does: Gets your item, grades it, gives it a serial number, cases it, ships it back to you.

AFA is a professional grading source for action figures.  On top of grading your item they will place it in a closed acrylic case with the grading score easily visible and a serial number that can track the item information on their website.  The case your item is placed in is very attractive and displays your item very professionally.

Here is a photo of a loose Star Wars item graded by AFA.

Here is a clip from their website.
"Sellers can usually expect a dramatic increase in the resale value of their figures if they are graded by AFA.  Also, because they know what to expect, buyers tend to return AFA graded figures less frequently than other items. EBay is an excellent example of this...just look at our eBay Auction Watch and you'll see the amazing market demand for AFA graded figures."