It's a simple program that allows to transmit voice through the internet, based on the voip protocol (voice over the internet).
By installing this software it is possible to call and videocall for free any other user who has it, anywhere they are in the world, as long as they are connected to the internet.
In addition to talking, other functions are available, like the chat, videocall and sending files of big size.
Currently Skype is being used by hundreds of millions of people in the world and is the most used voip software. It has been acquired by eBay, the giant of online auctions.