Oracle
Bridge between a blockchain and external data (prices, weather, scores).
A smart contract on a blockchain doesn't know on its own what BTC costs or what the weather is, as it lives in isolation. An oracle feeds it that data. Most popular are: Chainlink (LINK) providing price feeds for most of DeFi. Others include Pyth (Solana), API3, and RedStone. A bad or hacked oracle is a disaster: in 2022, a Mango Markets oracle attack resulted in $110M being stolen.
In plain words
A smart contract doesn't have internet access on its own, so it doesn't know BTC's price, a match score, or the weather. An oracle is a service that delivers that data in a tamper-resistant way. Without oracles, there are no Aave liquidations, options, derivatives, or stablecoins. Chainlink handles almost the entire market.
Example
Mango Markets, Oct 2022: an MNGO price oracle attack drained $110M in 30 minutes.
Also known as: chainlink