A flaky biscuit is one that flakes or separates into thin layers. Fat or butter creates flakiness by being a spacer between the layers of dough. Pieces of cold, hard fat keep layers of the dough apart in the oven just long enough for the dough to begin to set. The fat melts, and then steam from the dough forms and pushes the layers apart.
The butter should be cold when used in biscuits, and must be in large enough pieces so it will not melt easily. If the butter is very cold and firm when the dough goes into a hot oven, the layers of dough will be spaced apart as they begin to bake and set, resulting in flaky biscuits.