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A template is the type of Joomla! extension that changes the way your site looks. There are two types of templates: Front-end Templates and Back-end Templates.
Front-end templates change the way your site looks to average users. Most of the templates you use will be Front-end Templates. Two Front-end templates come preinstalled with Joomla!: rhuk_milkyway and beez.
Back-end Templates are much rarer than Frontend Templates. You will probably never need to change your Back-end Template. Back-end Templates allow you to change the way the administrator interface looks.
There are some wonderful templates that were made in the template contest. There are also many websites where both free and non-free Joomla! templates can be downloaded.
If you are interested in creating your own template than there are a few thing that you might want to know before you start. first you will need to know CSS, html, and php. Joomla! has created a tutorial for those how would like to create their own template.
Here is a list of Wiki articles in the Template category. Joomla Documentation Template Category