The acronym SASE stands for Self Addressed Stamped Envelope.
Many publications will ask you to send with your mailed submission a SASE. Even if the submission guidelines don't ask for a SASE I recommend you include one. Keep the receipts for this sort of expense, the envelopes and postage are tax deductible in most circumstances if you claim any income from your writing. Though do check with your tax person for the appropriateness of this type of deduction.
When you include a SASE it should be a standard business size envelope (the size your paper fits in when folded horizontally in thirds) with your home address in the center. Be sure to use your real name not your pseudonym on this address. It should include appropriate postage on it to return the envelope to you. If you are offering your work to a publication outside of your home country you can generally use an International Reply Coupon for the postage. If you don't need/want your manuscript back say so on your cover letter politely and that will save you postage on your SASE.
One hint an editor offered to me at a writer's conference was to only include the publication you are submitting to's name in the upper left hand corner. Now, the post office may frown on this practice, but her reasoning was this... If you didn't put enough postage or say postage costs were raised in the time it took for that magazine to send a reply to you and there is no return address, then you will get your envelope as that is the only address they have to deliver it to (though your mailman may make you give him the penny or two that is owed) rather then it being returned to the sender for the additional postage.