What is a template?
From Joomla! Documentation
The Template controhttp://docs.joomla.org/skins/common/images/button_image.pngls the overall look and layout of your site. It provides the framework that brings together common elements, modules and components as well as providing the cascading style sheet for your site. Both the Front-end (Site) and the Back-end (Administrator) of your site have templates.
When Joomla! is installed several templates are automatically included. You can find many more templates at other websites. Some are available without charge under various licenses, and some are for sale. In addition, there are many designers available who can make custom templates. You can also make your own template.
Templates are managed with the Template Manager, which is located on the site menu on the Back-end of your site.
The following may be helpful in understanding templates: