A hank is where the yarn is wound, for example, over two pegs. Imagine holding your hands out a foot apart with your thumbs up and having someone wrap a length of thread around and around then taking that circle of yarn, letting it off your hands. Or like winding it around a large spool then removing the spool from the center. It tends to twist around itself and is usually tied with the end of the thread around one part so you can find the outside end, separate it, and reverse the process, rolling it into a ball.
Aunt Lydia's Rug Yarn was always (as far as I've seen) in hanks, for example, if you've seen those, or like embroidery thread is wound.
it will end up looking like this:
http://www.berroco.com/images/quest/quest_hank_500.jpg