VPN in simple word is virtual link over a real link..
Like if I have internet connection and I have created VPN link between two machines at remote location through that internet connection then its call VPN.
It means though both machines are using internet but actually are directly connected to each other in virtual network which runs over internet, so they are in more secure state as there communication will not be affected by other network communication.
You can read more at wikipedia :
http://en.wikipedia.org/wiki/Virtual_private_network
