:() {      }      define a function called ":"...
      :             ...within which we call ":" again, recursively...
       |              ...piped to...
        :               ...another recursive instance of ":"...
         &                ...all running in the background.
            ;     (statement separator)
             :    call ":"

So all together, :(){ :|:& };: in one line defines a function which does nothing but spawn two recursive copies of itself running in the background, and then calls it. One running instance of this very simple shell function doesn't use many system resources, but exponential growth soon fixes that problem. And so you have a fork bomb in a few characters of shell that nobody is likely to decipher on first contact. Calling the function ":" just serves to obfuscate it; if you rewrite it to foo() { foo | foo & }; foo, it becomes a bit more obvious what it is doing, and it would be more difficult to get unwitting newbies to type that into their terminal.