They are tokens whose value is pegged to the value of another asset, usually a fiat currency. A popular example is USDT, which stands for US Dollar Tether, meaning its value is tethered to the US dollar. 1 USDT will always be equal in value to 1 USD. The main difference is that USDT are tokens on a blockchain, whereas the USD is either paper money or a balance in a bank account.
Stablecoins are mainly used as a gateway between regular currencies - also referred to as fiat money - and cryptocurrencies. They are issued on blockchains, and can be used in transactions and smart contracts, with the most usage coming from trading.