A nice post by David Lenehan on Widgets.
A Web widget can be best described as a mini application that can add functionality to your web page, blog, social profile etc. If you find a widget that you like, you simply copy and paste some code and add it to the HTML of your web page. Photo galleries, news, videos, advertising, mp3 players and pregnancy countdown tickers! You name it, there is probably a widget that does it.