In a very broad sense, Ethereum is a package of goodies that allows you to make an economic system in software. This is similar to the board game monopoly in a sense, where the game has it’s own money that’s not usable outside of that system. You have a unit of exchange called a token or a cryptocurrency (Ether) that can be used as money and passed between people, and you have a game that is based on the exchange of those tokens.
The interesting thing about Ethereum however, is that it doesn’t need a bank or any other authority to hand out money. All the information a bank would need to give you the money would be stored on Ethereum, in something called the blockchain. This “decentralized” nature of this system is what makes Ethereum and others like it really awesome. There is no reliance on any one person or node in network.
In a centralized system, if the central node (black dot on diagram) breaks, the rest of the system will become disconnected and unable to function. In decentralized, if one part breaks, the unbroken sections would continue to work properly.