As per Ryan's and Scott's comments the feature you are looking for can be found under
Object -> Path -> Simplify...
This will present you with the following dialog:
Here you are given some control over how it should simplify a path.
Enter a value between 0% and 100% to set how closely the simplified
path should follow the original path. A higher percentage creates more
points and a closer fit. Any existing anchor points are ignored except
for endpoints of a curve and corner points (unless you enter a value
for Angle Threshold).
Enter a value between 0 and 180° to control the smoothness of corners.
If the angle of a corner point is less than the angle threshold, the
corner point is not changed. This option helps keep corners sharp,
even if the value for Curve Precision is low.
Creates straight lines between the object’s original anchor points.
Corner points are removed if they have an angle greater than the value
set in Angle Threshold.
Shows the original path behind the simplified path.
When you're happy with your options, hit apply. Here's an example of a simplified straight line with default settings:
Note that if you're looking for more manual control there's also a tool called the
Smooth Tool which essentially lets you draw over a path in order to smooth or simplify it by hand. Click here for more information.