Tremolo means a modulation in volume; in the context of stringed instruments, usually refers to repeatedly striking or bowing a single string in a steady rhythm, especially the fastest rhythm the player can maintain. (This technique is particularly common on the acoustic mandolin.) In guitar literature, this is called tremolo picking, and one of the few places the term "tremolo" is consistently used "correctly" in guitar literature (whose convention usually reverses tremolo and vibrato). This technique has nothing to do with a "tremolo bar" (really a vibrato bar) or a "tremolo" effects box.

Tremolo picking, though appearing hard at first, is actaully quite easy. It is merely alternate picking at a faster speed. To start off, a pick makes tremolo picking much easier and is highly recommended when attempting it, but even though most people find tremolo picking much easier with a pick, but it is nevertheless possible without a pick. The best way to hold your pick is inbetween your thumb and the side of the first knuckle of your pointing finger, but if you feel more comfortable holding it another way, such as with your thumb and middle finger then go ahead.

An important aspect of tremolo picking that many beginners fail to realise is that you must have a relaxed grip on the pick, as when you try to pick when holding the pick tensely, you will find that the pick hits the string harder therefore making it harder to pass through the string, causing it to sound sloppy. Maintaining a relaxed grip becomes harder when playing faster, but you will quickly get used to it.

When tremolo picking make sure you use your whole forearm and not just your wrist, as this will make it much easier to pass through the string. Also, when you pick the string, make sure your hand doesn't go to far away from it, as this will slow you down. The impact from hitting the string usually forces your hand to leave the string, but after practicing a it more, your hand will get used to it. (Courtesy of Wikipedia)