Sempai-kohai means seniority rules in Japanese relations. It seems every culture has more or less respect for the eldery, but in Japan this is especially strong. Sempai means elderly or those who are more able, and kohai means a younger, or student. It is crucial to understand the difference of these.
When talking to their superiors, Japanese use honorific keigo language. There are various types of keigo, such as sonkeigo, teineigo and kenjogo. Songeigo means that the speaker will raise the addressee by honouring him with adding -sama - sensei to their names or titles. Samurai-sama. Watanaba-sama. Kenjogo instead is style of speech what lowers the status of the speaker himself, expressing humility. Teineigo instead is something neutral between these.
Sempai-kohai begins already in school, where elder students have authority in club activities. Kohai students are to do all the nasty tasks, cleaning, and so. If school has a fishing club, it would be easy to imagine that kohai students carry the rods for sempai. It is generally said that in universities this relationship is less strong, since there is more variation of age among the pupils.
Eventually it's the company where sempai-kohai rules. In Japan it's still not uncommon to work through your life in same company. All aspects of your situation, including the respect and salary you receive, depend on your sempai status. However people usually didn't pay this much a thought and was dealt as a matter of course. As long as they were loyal to their company, people were guaranteed good position.
However, sempai-kohai system is breaking down in Japanese society, and Japan is employing "ability first" thinking. Even if person is sempai, he is required to perform his duties well - if he doesnt, he will be replaced, perhaps with a younger employee.