Umlaut and breaking are both phonetical processes, sound changes, that could affect the vowel of a stressed syllable, and make it more alike a following unstressed vowel. The word gestr 'guest' was in the proto-germanic language *gastiz, but the umlaut made the /a/ of the stressed syllable (the stress is always on the first syllable) assimilate to the unstressed /i/ that follows, and thus the /a/ turns into /e/ – the assimilation does not go all the way to /i/.
This is an example of i-umlaut, but there is also a-umlaut and u-umlaut, a-breaking and u-breaking, which are caused by /a/:s and /u/:s respectively. Since different endings had different vowels, they affected the stem vowel differently. Thus the 3rd person singular present tense form of the strong verb fara, which once was *fariR, became ferr through i-umlaut, whereas the 3rd person plural form, which was *faran, became fara, without i-umlaut.