ETFs track an index, a commodity, bonds, or a basket of assets like an index fund. They take the "exchange traded" portion of their name from the fact that they are traded like securities on major exchanges, and even have their own stock symbols just like individual, publicly-traded companies. But they are funds in the sense that each share of an ETF represents an investment in several different issues.
Unlike mutual funds, which are priced daily at the end of each day's trading session, the prices of ETFs fluctuate throughout the day as they are bought and sold. That makes them easier to buy and sell. You only need a discount brokerage account to start buying and selling ETFs. Additionally, you can short ETFs or place limit orders, in which you automatically purchase shares when they hit a certain price.
Most ETFs track an index, such as the Nasdaq or the Dow Jones U.S. Technology Index. On average, ETF taxes are ½ of those levied on mutual funds and expense ratios are about 1/3 of those charged by actively-managed mutual funds.