An exchange-traded fund (ETF) is a financial instrument whose value mirrors a collection of underlying assets. For example, one might have an ETF that tracks the entire S&P 500, so the value of the ETF goes up by 1% if the whole market goes up by 1%.
ETFs are a tax-preferred alternative to a mutual fund. Capital gains taxes are only assessed when one sells an asset. However, if one buys shares in a mutual fund, since the mutual fund is a collection of stock, the fund manager will have to pay taxes (which they pass on to the investor) every time they rebalance their stocks within the mutual fund. However, investors in an ETF only pay taxes when they sell the ETF shares itself, and do not have to pay taxes for rebalancing.
ETFs have exploded in popularity in recent years, growing from under half a trillion in 2005 to almost $8 trillion in 2020.