The Joomla Template controls the overall layout of your site. It brings together common elements, modules and components as well as providing the cascading style sheet for your site. Both the Front-end (Site) and the Back-end (Administrator) of your site have templates.
What is a Template
A template is basically the design of your Joomla powered website. With a template you can change the look and feel of your website. Templates have certain fields (positions) in which the component (just one) and modules (as many as you like) will be shown. Templates are easy to build or customize and they provide maximum flexibility in how you style your site. Both the Front-end (Site) and the Back-end (Administrator) of your site have templates.
Templates are Joomla extensions, are installed just like any other extension through the Joomla Extension Manager, and are managed through the Template Manager.
Types of templates
There are two types of templates used in a Joomla CMS powered website.
Front-end Templates 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. There are both free and commercial Front-end templates available, and they can be customized to fit your needs.
Back-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.
Joomla developers should go to the Template Development portal page for more topics on developing a Joomla template.