Tor is a set of free and open source software components, and a network, designed to allow people to communicate without having their privacy compromised. This can be important to journalists, activists, and those engaged in law enforcement activities.
Various users run Tor software to provide a network of proxy servers configured in a way such that it is difficult to observe the traffic in the network and trace particular communications flows back to a user. This is accomplished with a technique known as onion routing. On a very basic level, several proxy servers are chained together in a way such that it is difficult to determine the origin of the traffic traveling through the network. There are additional features such as "hidden services" which allow for users to run servers without revealing their location or identity.
There is also a web browser, the Tor Browser, which is configured to use the Tor network to communicate and also includes various other enhancements designed to prevent information leakage.