The double dots over the "a" are what is called an umlaut. It's used in German as well as in many Nordic languages and changes the pronunciation of the letter it appears over. As seen the picture posted here, when positioned over an "a", the pronunciation goes from "ah" to "aah". I know that because I studied two semesters of German in college.
As for specifically what kind of alcohol Jägermeister is, it's a type of liqueur called Kräuterlikör (herbal liqueur). If you couldn't already tell, it is indeed a German-made drink. And contrary to an urban legend, it does not contain elk blood.
http://www.snopes.com/business/secret/jagermeister.asp
I myself have a diecast Porsche 959 race car in my basement that has Jägermeister livery on it. I've had the car since I was a kid, but never knew what it said on the car.

The accents give it away as German. As for what it says, it says Jagermeister. Its an alcohol. http://en.wikipedia.org/wiki/Jägermeister