Plugin is the name given to a piece of software which extends another piece of software. Literally, you plug it in!
In WordPress, many of the coolest features are brought to the table by plugins. WP by itself is a pretty powerful CMS, but most of the good stuff is added on by plugins, which is where the software really gets its power: its a modular system, onto which you can add what you need to the core.
Probably the biggest and best of the WordPress plugins (I know, we’re biased, as WooExperts!) is WooCommerce, which gives you the power of the world’s best eCommerce platform at your fingertips as a WordPress webmaster.