The earth acts as a giant magnet with the poles close to where our axis of rotation is, but not quite there.  It is believed -- although not know for certain -- that the magnetic field of the earth is caused by currents of charged particles deep in the core.

The magnetic poles wander a bit year to year.  It is believed that the magnetic poles have switched many times during the history of the earth.  This has been inferred by looking at the orientation of magnetic particles in the rocks around the places where the sea floor is spreading.   As the lava comes up out of the cracks it cools and the iron in it maintains the magnetic orientation of the earth's magnetic field at the time.  The rocks on the sea floor show stripes of magnetism with north and south changing position.  This won't be an issue in our lifetimes, as the process is very slow:  the magnetic poles last switched 730,000 years ago.
 
 

The difference between Magnetic North and Geographic North is important if you are using a compass to navigate.  For us, the difference would throw us off only 1.5 degrees, which is only significant if you are doing precise orienteering.

In Alaska, the difference between Geographic North and Magnetic North is a big deal!  Local maps generally contain a note and graphic showing the difference between MN and GN for the area of the map.

It is important to note that what people call  the "Magnetic North on the Earth" is really the South pole of the earth's magnet, since the "North-seeking Pole" of a lodestone or small magnet (what we call "the North Pole") is attracted to it (and un-like poles attract).  You could also think of the earth's Magnetic North pole as "The place on earth to which the North Pole of magnets point."  Think about this!  It may take you re-reading these sentences several times!  It might be helpful to go back to the description of the lodestone compass.