In computing terms a daemon is a server process which is resident in memory but inactive until it is woken up by an operating system event. The server-side process of most network applications is implemented as a daemon: it initializes itself as necessary in order to be able to perform its service then establishes a socket, usually at a well known port number, before becoming inactive. When a client attempts to connect to the server socket, the daemon process wakes up, services the request (often by spawning a new server process), before returning to its quiescent waiting mode.

In the Unix operating system daemons are often identifiable by ending in the letter d, for example httpd, sshd, ftpd and telnetd. Daemon processes are usually started by the operating system when it boots up. Windows also has daemons, which are called sevices, but windows doesn't necessarily use a naming convention to identify them.

You can read more about daemons at Wikipedia.

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