Daily compounding means interest is calculated on your balance every day rather than once a month or once a year. Most savings accounts work this way, though they usually credit the result monthly.
Less than most people expect. $10,000 at 5% over 20 years reaches $27,180.96 compounded daily, against $26,532.98 compounded annually. That is a difference of $647.98 over two decades - real, but small next to the effect of the rate itself.
The frequency matters more at higher rates and over longer periods. At everyday savings rates it is worth a fraction of a percent, which is why the quoted rate is far more important than how often it compounds.
Most savings accounts calculate interest on the daily closing balance and credit it monthly. So the calculation is daily, but the money only appears - and starts earning interest itself - once a month. That distinction is why your statement can look slightly different from a pure daily compounding figure.
A = P(1 + r/365)365t, where P is the principal, r the annual rate as a decimal, and t the number of years. The compound interest formula page works through the general version, and the savings calculator handles regular deposits and withdrawals.