Penis banding is the act of placing a constrictive material around the penis to decrease functionality by damaging nerves.
This is accomplished by reducing blood flow to the penis and/or by damaging the nerves directly beneath the band by sheer force.

It can be performed as part of BDSM to show commitment or servitude or as a form of chastity or orgasm denial, where the goal is either to numb the penis, or damage it to such an extent that it can no longer become erect, thus rendering it useless. This provides a means to deter someone from having orgasms without dealing with Chastity Devices.

Source: http://t-vox.org/information/definitions/penis-banding