The find man page explains this quite succinctly:
Code:
-exec command ;
Execute command; true if 0 status is returned. All following
arguments to find are taken to be arguments to the command until
an argument consisting of ‘;’ is encountered. The string ‘{}’
is replaced by the current file name being processed everywhere
it occurs in the arguments to the command, not just in arguments
where it is alone, as in some versions of find. Both of these
constructions might need to be escaped (with a ‘\’) or quoted to
protect them from expansion by the shell. The command is exe-
cuted in the starting directory.
(Emphasis added) In essence, the {} means the file that's currently been found. Then \; (actually just a ;, but it needs to be escaped, hence the \) signifies the end of the command.