It is basically an on-line journal of sorts, a form of expression that is defined by each individual blogger. According to the Jargon File 4.1.0:
[common] Short for `weblog’, an on-line web-zine or diary (usually with facilities for reader comments and discussion threads) made accessible through the World Wide Web. This term is widespread and readily forms derivatives, of which the best known may be `blogosphere’ (the hyperlinked totality of all blogs and the culture that surrounds it).
Blogs can be personal or professional, topical or random, updated hourly or once a month or longer – it is all up to the individual.
I’ll update this post periodically with new information.
UPDATE (2003-03-07): Here is an nice article from the New Zealand News on the addictiveness of blogs for both the reader and author.
UPDATE (2003-04-15): Another good explanation.