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An umlaut is a diacritic or accent used in some languages, including German. They are written ä, ö, ü (or ae, oe, ue).
Without the diaeresis (the dots) those three letters are said [a], [o], and [u]. In German, when the dots are put over them, Ä, Ö, and Ü change to sound like [ɛ], [œ]/[ø] and [y]/[ʏ].
When a word that has umlaut letters with dots is changed into English, the letters are usually written as ae, oe, or ue instead of ä, ö, or ü.