Iconv is a library for converting between different character sets. It is required to compile Freeciv.
On most Unix systems Iconv is included on your system by default. On GNU/Linux it is included as a part of glibc.
If your system does not have iconv development libraries, or if your iconv isn't good enough, you can install GNU Libiconv. GNU's iconv is much better even than the iconv that comes with Glibc. Iconv source code can be downloaded from http://www.gnu.org/software/libiconv/. Iconv for MS Windows can be downloaded precompiled at http://gnuwin32.sourceforge.net/ (and perhaps other sites as well).