In WordPress a widget is a self-contained area of a web page that performs a specific function, or the code that generates such a self-contained area. For example, WordPress has a built-in widget that displays a list of pages in a weblog's sidebar, and it has another built-in widget that displays a list of recent comments in the Dashboard. Plugins and themes can provide additional widgets.

Reference http://codex.wordpress.org/Glossary

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