The Internet of Things (IoT) is the network of everyday objects — physical things embedded with electronics, software, sensors, and connectivity enabling data exchange. Basically, a little networked computer is attached to a thing, allowing information exchange to and from that thing. Be it lightbulbs, toasters, refrigerators, flower pots, watches, fans, planes, trains, automobiles, or anything else around you, a little networked computer can be combined with it to accept input (esp. object control) or to gather and generate informational output (typically object status or other sensory data). This means computers will be permeating everything around us — ubiquitous embedded computing devices, uniquely identifiable, interconnected across the Internet. Because of low-cost, networkable micro-controller modules, the Internet of Things is really starting to take off.
ESP8266 (presently ESP8266EX) is a chip with which manufacturers are making wirelessly networkable micro-controller modules. More specifically, ESP8266 is a system-on-a-chip (SoC) with capabilities for 2.4 GHz Wi-Fi (802.11 b/g/n, supporting WPA/WPA2), general-purpose input/output (16 GPIO), Inter-Integrated Circuit (I²C), analog-to-digital conversion (10-bit ADC), Serial Peripheral Interface (SPI), I²S interfaces with DMA (sharing pins with GPIO), UART (on dedicated pins, plus a transmit-only UART can be enabled on GPIO2), and pulse-width modulation (PWM). It employs a 32-bit RISC CPU based on the Tensilica Xtensa L106 running at 80 MHz (or overclocked to 160 MHz). It has a 64 KB boot ROM, 64 KB instruction RAM and 96 KB data RAM. External flash memory can be accessed through SPI.
Various vendors have consequently created a multitude of modules containing the ESP8266 chip at their cores. Some of these modules have specific identifiers, including monikers such as "Wi07c" and "ESP-01" through "ESP-13"; while other modules might be ill-labeled and merely referred to by a general description — e.g., "ESP8266 Wireless Transceiver." ESP8266-based modules have demonstrated themselves as a capable, low-cost, networkable foundation for facilitating end-point IoT developments. Espressif's official module is presently the ESP-WROOM-02. The AI-Thinker modules are succinctly labeled ESP-01 through ESP-13. NodeMCU boards extend upon the AI-Thinker modules. Olimex, Adafruit, Sparkfun, WeMos, ESPert (ESPresso) all make various modules as well. See the ESP8266 article on Wikipedia for more information about popular ESP8266 modules.