(see Service (Windows) for Windows equivalent)
A daemon is a process that runs in the background. This means that it's usually not involved in dealing directly with a user that is currently using the computer. Usually, daemons wait for some sort of activity that they then deal with. For example, a web server is a daemon that waits for a connection to the computer on port 80. Then, the web server will respond with the requested page from a web site.
Other examples of daemons include
SSH server
Mail server (waits for
syslog daemon (waits for something to log from programs and then writes it to the system log files)