External fertilization occurs only in aquatic species; males release their sperm, and females their eggs, directly into the water, and the sperm then have to find their way to the eggs. This is a very successful fertilization method for many freshwater and ocean dwelling species, particularly for those that are sessile (remaining in one location) like corals. However, these species are permanently limited to living in a water environment.
Biologists believe that the development of the amniotic egg, which kept the embryo from drying out without needing to be kept submersed in water, was a key turning point that allowed animal species to colonize the land. However the waterproof covering of the egg would also present a significant barrier to sperm, so these eggs need to fertilized before the covering is completed. This necessitated the development of internal fertilization. In some more primitive species the transfer of sperm into the female reproductive tract is fairly simple and direct, while in more evolved species this has become quite complex, leading to highly developed copulatory organs and mating behaviors.
Ultimately, without the development of internal fertilization, the only land dwelling crreatures we would have would have a life history similar to that of amphibians, which are dependent on water for their reproductive cycles to be completed.