Operating on the theory that you can never have too many useful explanations of a complex subject, here is a very good answer to the question: What is molecular manufacturing?
Molecular manufacturing is an anticipated future technology based on Feynman’s vision of factories using nanomachines to build complex products, including additional nanomachines. It promises to bring great improvements in the cost and performance of manufactured goods, while making possible a range of products impossible today.
Every manufacturing method is a method for arranging atoms. Most methods arrange atoms crudely; even the finest commercial microchips are grossly irregular at the atomic scale. Many of today’s nanotechnologies face the same limit. Chemistry and biology, however, make molecules defined by particular arrangements of atoms — always the same numbers, kinds, and bonds. Chemists do this using clever tricks that don’t scale up well to building large, complex structures. Biology, however, uses a more powerful method: cells contain molecular machines that read digital genetic data to guide the assembly of large molecules (proteins) that serve as parts of molecular machines. Molecular manufacturing will likewise use stored data to guide construction by molecular machines, greatly extending abilities in nanotechnology.
The basic idea is simple: where chemists mix molecules in solution, allowing them to wander and bump together at random, nanomachines will instead position molecules, placing them in specific locations in a carefully chosen sequence. Letting molecules bump at random leads to unwanted reactions — a problem that grows worse as products get larger. By holding and positioning molecules, nanomachines will control how the molecules react, building up complex structures with atomically precise control.
That's from e-drexler.com.