A template is a type of Joomla! extension that changes the way your site looks. There are two types of templates used by the Joomla! CMS: Front-end Templates and Back-end Templates. The Front-end Template controls the way your website is presented to the user viewing the website's content. The Back-end Template controls the way your website's administrative tasks are presented for controlling management functions by a Joomla! Administrator. These would include common tasks such as: user, menu, article, category, module, component, plugin and template management.
Front-end templates change the way your site looks to average users. Most of the templates you use or install will be Front-end Templates.
Back-end Templates are much rarer than Frontend Templates. You will probably never need to change your Back-end Template. Back-end Templates allow you to change the way the administrator interface looks.