FK = forward kinematics, which describes how the skeleton works, with rotations at joints being passed down the skeletal hierarchy (e.g., shoulder to arm to hand).
the complementary term is IK, inverse kinematics, where motion is transferred up the hierarchy -- move a hand bone and the arms & shoulder respond accordingly.
both methods are used for animating models, but having IK capability makes some motions a lot easier to set up & keyframe, 'specially those of humanoid limbs.
further news on MS3D 1.7.3: i took a closer look at my "successful" import and found that in UEd, the bones of the model are rather radically displaced from the meshes -- the motion looks OK, but it's still a bug, methinks.