Every interviewer has their own pet question that the candidate is COMPLETELY UNQUALIFIED if they don't know.
My short answer to "What is MVC?" is that it's a popular web development trend, but without much substance to back it up. Every MVC project that I've been supporting/maintaining was a nightmare, taking 3x-5x longer to get stuff done than what I consider reasonable.
MVC = Model-View-Controller. It's usually for web development. You structure your code in a way that separates the data logic (Model), the user presentation logic (View), and the glue that holds the bits together (Controller).
There are many popular MVC frameworks that let you churn out a lot of mediocre websites quickly (angular.js, Ruby on Rails, Zend, Django(Python), and many others). The MVC framework does a lot of routine coding for you, but it comes at a price. The code can become a nightmare to maintain, especially if you use the MVC framework incorrectly. If you do something outside what the MVC framework provides, it can become a handicap rather than a help. The MVC framework usually demands you write your whole application in its preferred style, such as spreading out your code in various directories with forced naming conventions. MVC frameworks tend to be poorly documented compared to the underlying language (For example, compare the zend documentation to php.net).
The point of it is two-fold: separation of concerns, and DRY. But the reason it so ugly on the web when it produced elegant code for GUIs is the reason that web controller schemes are not MVC.
Errm, it's a pattern often used for UI (CLI and GUI) programming that was first commercially introduced in Smalltalk-76 (in 1976). [This predates Windows and Mac by many years.]
MVC can be done -with varying degrees of difficulty- in any computer language. You don't even need a web development framework to implement it! ;-)
iOS/OS X seems to do real MVC, with lightweight reusable view objects managed by ready-made controller classes. The obvious benefits are minimal memory and streamlined data flow. You only ever make/use the view objects you really need, you can recycle them to save memory, and - in OS X especially - controller objects include useful ready-made convenience methods.
Web frameworks often seem to do something that looks like MVC if you squint and don't think too hard. But when you're forced to use separate languages for logic (js), markup (HTML), and view design (CSS), and handle separate client/server environments, and there's inevitable overlap between all of the above (jquery etc) because stuff doesn't "just work", and you probably have yet another layer as a DB driver, it gets very complicated very quickly - to no great benefit.
The web has become a snarly ball of warty epicycles. That's why native is so popular - you get one common language for logic, views, and data, with a clean-ish interface to a remote server if you need one.
When everything works together like that, you can think seriously about MVC.
When the core concerns are all over the place already, it's a mess before you even start.
Which is not to say you can't work with it and build cool stuff - more that you can't just airdrop in a design pattern from a different tradition without thinking really, really hard about what, why, how, and what happens a year from now.
Separation of concerns and DRY are both good. MVC doesn't succeed at either, except in idealized corner cases.
[1] A lot of widgets in Windows, for instance text fields, encapsulate the view (it's where the text is displayed), the model (which keeps the text in the control), and the controller (the widget handles the UI for entering text, catches and handles the mouse, etc.).
(In angular, when you edit data in the view, the model is immediately updated, which is why it's MVVM and not MVC.)
There's lots of ways to decompose a program, each with its own strengths and weaknesses. MVC is a particular decomposition that is useful for interactive applications. The components are named Model, View, and Controller. An example of an advantage of this decomposition is that you can apply a different user interface (e.g. a command line one) by exchanging the View, without needing to change the Model.
Other answers here have focused on MVC as it applies to web development. But MVC is from the 70s, predating the web by many years! If you look beyond the trend, you see ideas rooted in an effort to architect software well, and see MVC as just one design, one particular decomposition. The key idea is not MVC itself, but the principles behind it. Being able to place ideas into larger contexts shows mastery, in my view.
To be honest, I'm not entirely sure that the MVC example would be a good question to ask to a younger candidate. If you had been around during the early days of web development (i.e. CGI scripts based on Perl or raw PHP, or Java where all of your logic is crammed into a JSP page), then you could say all sorts of things about the shift toward MVC being the norm. However, if you came along after that shift, and every web framework you've ever seen has been some variation on MVC principles, then it's a bit like asking a fish to describe water.
Anyway, if you're just getting started in the field, and haven't had much interview experience yet, then try not to let it get to you. Interviewing involves a TON of rejection, and that never really stops. If interviews ever start feeling easy, then it means you're selling yourself short... and you should be interviewing for more senior positions with higher salaries.
To get started though, I would suggest simply doing a Google search on "programmer interview questions", or something more specific to your background (e.g. "java interview questions"). This is exactly what the majority of your lazy interviewers are doing to come up with their questions anyway. As you encounter questions that you can't answer, then look them up and read about it (e.g. http://en.wikipedia.org/wiki/Model%E2%80%93view%E2%80%93cont...).
BigO, data structures and having a good idea how computers work, what matters for performance both from theoretical and practical perspective, matters infinitely more to us that knowing how to play object-oriented BS bingo or subversion usage patterns.
If you know what MVC stands for, you're know enough about OO patterns to me.
Not going to argue that we got it right way(tm), just wanted to give you another perspective.
1) You've got a code base large enough that they matter; 2) You wrote it initially without using something like MVC; 3) And then it grew into a ridiculous monstrosity, which you then cleaned up by breaking it into models, views, and controllers.
At that point, if it turns out well, you start to "know it in your heart" instead of just being a nebulous concept that you read in a blog/textbook/whatever somewhere.
Am I totally unfit for developing software?
If not, What is the correct answer that will prevent me from getting COMPLETELY EXPOSED (in your words) if you ask me this MVC question in an interview?