Legendary is a supertype that that can be found on various card types.
It is usually reserved for iconic characters that appear in the storyline or powerful cards for balance purposes.
The "legend rule" is as follows:
- 205.4c Any permanent with the supertype “legendary” is subject to the state-based effect for legendary permanents, also called the “legend rule” (see rule 420.5e)
- 704.5k If a player controls two or more legendary permanents with the same name, that player chooses one of them, and the rest are put into their owners’ graveyards. This is called the “legend rule.”
In the past the "legend rule" stated that any legendary permanent with the same name as a legendary permanent already in play could not be played. This caused problems as copies of legends became stranded in a player's hand.
The biggest problem for the old legend rule came when Masques Block came around. In constructed there were only two deck choices: rebels and anti-rebels. The rebels deck leaned heavily on (create). In tournaments the gamewas often decided on who could play the legend first.
Wizards of the Coast decided this was not a good situation and the new legend rule was created to make legends more interactive. This change proved to be quite well. A lot of legends have been created since and there even was a block based on legends: Kamigawa Block.