A template is a file that serves as a starting point for a new document. When you open a template, it is pre-formatted in some way. For example, you might use template in Microsoft Word that is formatted as a business letter. The template would likely have a space for your name and address in the upper left corner, an area for the recipient's address a little below that on the left side, an area for the message body below that, and a spot for your signature at the bottom.
When you save a file created with a template, you are usually prompted to save a copy of the file, so that you don't save over the template. Templates can either come with a program or be created by the user. Most major programs support templates, so if you find yourself creating similar documents over and over again, it might be a good idea to save one of them as a template. Then you won't have to format your documents each time you want to make a new one. Just open the template and start from there.