You can think of it as a sort of heirarchy descending from the strategic goals of the organisation to the physical implementation of tools and processes.
- Business Requiremets
- Functional Requirements
- System Requirements
Here is a concise article explaining the concept. Note it adds a fourth level to the front - market drivers for change. This article describes the four levels of requirements, gives a view on who should 'own' each level and how they are usually modelled or documented - "The Requirements Hierarchy" Posted April 30, 2007 by John Mansour
And here is a similar article with a slightly different view at Search Software Quality; What Are Requirement Types Jan 01, 2008 by Roxanne Miller.And there is my post on this topic from a week or two ago.
Lastly, don't forget non-functional specifications. Often a neglected area, this is where many projects have trouble delivering.