In order for your website to be available to your visitors over the internet, your website needs to be "hosted" on a web server.
Web hosting is a service which includes physical servers (computers) and server software for storing your files, content and data, designed for and making it available via the internet. These web servers are equipped with specialized server software such as web hosting control panels which allow you to manage your website.
For a more complete description read our article:
Chili Pepper Web contributed an article that explains it well:
Bluehost created a great video that you may wish to watch:
- How Websites Work (Video)