Characters in quotes are character constants. The statement in question is checking whether the user has input a 'Y' or a 'y' (so that both upper and lower case are checked).
@chetzread, before you learned about loops and other control structures, there was probably some mention about the various types of constants that can be used in C. At least most of the books I've seen present such material in that order.
Character constants, such as 'y' or 'B' or '\t'
String constants, such as "cat"
integer constants, such as 23, 023, and 0x23 (all with different values)
floating point constants, such as 2.7 (a double) and 3.09F (a float)
This is not meant to be an exhaustive list.