A natural harmonic is like a bell sound, and is produced by lightly touching a guitar string in a specific place.

The most common place to play a natural harmonic is on the 12th fret. You play the harmonic by very lightly touching the string above the 12th fret bar. You don't press down on the string, but you very lightly touch the string. Once your hand is positioned, pick the string and then once the harmonic sounds, you can lift your finger off the string, and the harmonic will continue to ring. If you don't do this, the harmonic will still sound, but it will be a bit muffled. Try this out on the low G String (3rd String). This is how it would look on tab...

e|--------| B|--------| G|--<12>--| D|--------| A|--------| E|--------|

Along with the 12th fret, natural harmonics are also commonly played at the 7th and 5th frets.

Here is a good song to help you learn natural harmonics. It is good because it uses harmonics on more than one string...

e|-----<12>---------<12>---------<12>---------<12>----------|
B|---------<12>---------<12>---------<12>---------<12>------|
G|----------------------------------------------------<12>--|
D|----------------------------------------------------------|
A|----------------------------------------------------------|
E|--0------------0------------0------------0----------------|
Metallica - Welcome Home (Sanitarium)

Listen

Natural harmonics happen because, when you normally play the 12th fret, you shorten the length of the string that is ringing and you therefore get a higher pitch. This means that the string is only ringing from the fret bar that you are pressing down, to the bridge. However, if you play the 12th fret harmonic, the string will be ringing on both sides of where you are touching. The only part of the string that is not ringing is where you are touching the string. This point of the string that is not ringing is called the node. This all means that the string is ringing in 2 divided sections, playing an octave higher than normal. If you do this on the 7th or 19th fret, then you are cutting the string into 3 parts (with nodes at the 7th and 19th frets), and so you produce a note a 5th higher. The 5th fret divides the string in 4 parts (2 octaves higher), and so on.