Per-vertex shading involves computation of the shading model at each vertex and associating the result (a color) with that vertex. The colors are then interpolated across the face of the polygon to produce a smooth shading effect. This is also referred to as Gouraud shading. In earlier versions of OpenGL, this per-vertex shading with color interpolation was the default shading technique.
It is sometimes desirable to use a single color for each polygon so that there is no variation of color across the face of the polygon, causing each polygon to have a flat appearance. This can be useful in situations where the shape of the object warrants such a technique, perhaps because the faces really are intended to look flat, or to help visualize the locations of the polygons in a complex mesh. Using a single color for each polygon is commonly called flat shading...
