TL;DR An ETF (exchange-traded fund) is a basket holding dozens to thousands of investments — you buy one share of the basket and instantly own a sliver of everything inside.
The plain-English version
Buying individual stocks means making individual bets. An ETF says: skip the picking, buy the whole aisle.
One share of an S&P 500 ETF makes you a proportional owner of ~500 of America's biggest companies at once. One purchase, instant diversification. That's the whole trick, and it's a very good trick.
The "exchange-traded" part means it trades exactly like a stock: real-time prices, buy or sell any time the market's open, no minimums beyond one share (or less, with fractional shares).
What's inside the baskets
There's an ETF for nearly everything: whole-market indexes, sectors (only tech, only healthcare), bonds, gold, other countries, dividend payers, small caps. The index ETFs — the boring ones tracking the whole market — are what most long-term investors mean when they say "just buy ETFs."
The one number to check: expense ratio
The fund company takes a small yearly percentage for running the basket. Big index ETFs charge around 0.03%–0.10% — that's $3 to $10 a year per $10,000 invested. Niche and "themed" ETFs often charge 0.5%–1% — up to 30 times more, compounding against you every single year. Fees are one of the few things in investing you fully control. Check them.
ETF vs mutual fund, in one breath
Mutual funds are the older cousins: often similar baskets, but they only trade once per day, sometimes have minimums, and can be less tax-efficient. ETFs are the same idea with a better user interface.
The common mistake
Assuming "ETF" means "safe and diversified." An ETF holding 500 companies is diversified. An ETF holding 15 speculative companies in one hot theme is a concentrated bet wearing a costume. The wrapper doesn't make it safe — the contents do. Always look inside the basket.
Educational only — not investment advice. ETFs make owning everything easy; they can also make owning nonsense look respectable.