A digital "actor" or icon that represents who you are and where you are in the virtual world. 3-Dchat rooms and VRML worlds are examples of places where you would use an avatar to navigate your surroundings and communicate with other users. The avatar can be whatever you want, including a cartoon, an animal, or any graphical element. Just be aware that this image represents you!
The word comes from the Hindu philosophy where an avatar refers to the incarnation (bodily manifestation) of a higher being (deva).