Audio refers to recorded, transmitted, or reproduced sound. Audio can be digital (speaking into your cell phone) or analog (speaking into your gramophone, if you had one). Digital is more convenient for recording and transmitting audio, but if you would like to know more about the digital vs. analog differences, check out the “Comparison of analog and digital recording“ article on Wikipedia.
Understanding the mechanics of audio recording is extremely important for recording live music and interviews. Audio is often just as important as—if not more important than—the visual in a video. Recorded audio commentary is a great way to give voice to digital presentations. Music and/or sound effects are also great ways to liven up an animation.