A bond is a contract turned into a security. You hand over cash today, the issuer promises a stream of coupon payments, and on the maturity date it repays the par-value. Governments, companies and municipalities all issue them.
Traders care about bonds for two reasons. First, the yield on government bonds is the discount rate underneath every other asset, so equity valuations move when it moves. Second, bonds themselves trade all day with tight spreads and deep liquidity, and the price moves in the opposite direction to yields.
Example: a 10-year bond with a $1,000 face amount and a 4% coupon pays $20 every six months for ten years and then $1,000 at the end. If you buy it at $980 rather than $1,000, your annual return is a little above 4% because you paid less for the same cash flows.
Related: coupon, par-value, yield-to-maturity, maturity