test:coverage relies on XDebug to collect its information, you need to install it and enable it first.
How does it work?
SnapOverflow
It is a PHP module, requiring a small amount of server-side configuration to install
It expands the functionality of the PHP software itself by modifying its execution of scripts, pulling in details and allowing a much higher precision execution (including modifying code while its being executed and viewing variables/stacks/memory/etc) and formatting of process stack dumps. Its great, and free!
View more about it here: http://xdebug.org/docs/
Or in human terms of why Grizly said, it allows you to find bottlenecks (something that slows down the rest if your code) in your code so you can fix it. Its useful if you are performance freak (like me) or expecting a high traffic load.
XDebug is also used by PHPUnit to generate coverage statistics when running unit tests.