$\mathbb{R}(x)$ is not algebraically closed, as can easily be seen by considering the equation $xy^2=1$; there is no rational function $r(x)$ with the property that $xr(x)^2=1$. However, everyone knows how to solve this equation for $y$, obtaining $$y=\frac{1}{\sqrt{x}}, y=-\frac{1}{\sqrt{x}}$$ as the two solutions. So the solutions exist, but in order to find them we have to go beyond $\mathbb{R}(x)$ to a larger collection of functions.
The algebraic closure of $\mathbb{R}(x)$ would contain not only all rational functions, but also roots of all orders, plus some things we don't have names or notation for (solutions of polynomials with coefficients in $\mathbb{R}(x)$ of degree 5 or higher that are not solvable by radicals , for example). (The word "functions", here, is used somewhat casually, as most of these things are partial functions at best.) I guess it would have to contain $\mathbb{C}$ as well, come to think of it.
What is the algebraic closure called? Does it have a conventional name? I think of it as the "field of algebraic functions" but I don't know if that's standard terminology or if there's another, more commonly-used name. Is there a notation for it? Does it contain any other exotic things, besides what I have already mentioned?