A microcontroller is often described as a 'computer-on-a chip'.  It is a low cost integrated circuit that contains memory, processing units, and input/output (I/O) circuits in a single unit. Microcontrollers are purchased 'blank' and then programmed with a specific control program.

Once programmed the microcontroller is build into a product to make the product more intelligent and easier to use.

 

Source:

PICAXE Manual: www.picaxe.co.uk