A daemon is a process that generally starts at boot time and runs in the background (infinite loop) without human intervention until an event or condition activates it. Most daemons handle requests for network services from other hosts. Examples include crond (timed command execution), ftpd (file transfer), lpd (printing), rshd (remote command shell), rlogind and telnetd (remote login).
It's said that the word daemon is a corruption of demon. In the pun-heavy world of Unix operating systems, a logical branching structure that was referred to as a "fork" suggested the word pitchfork, and then demon.
The Greek word daemon refers to a subordinate deity, more than a human but less than a god, as the "genius" or "spirit" that helps to define the character of a place, or the "attendant power" that helps to define one's personality. Perhaps the closest modern concept is that of the "guardian angel," though to the Greeks a daemon was neither good nor evil, but morally neutral.