A phylactery was a term for a charm or amulet, or repository used to store small parchments bearing holy scripture or arcane writings.
A magic phylactery was used to store the souls and life force of liches. A mage had to create such a phylactery in order to become a lich, a highly expensive and taxing effort. Typically, a phylactery was a sealed metal box containing strips of parchment on which arcane phrases were inscribed. However, a phylactery could be any number of things, such as a ring or amulet.
If a lich's physical body was destroyed, it could regenerate where its phylactery was located over a matter of days. However, if the phylactery itself was destroyed, then the lich could not regenerate and would remain destroyed. For this reason, liches sought to guard their phylacteries powerfully against any attack.