A stock is an ownership interest in a company. When you buy a stock, you become a business owner, and the value of your ownership stake will rise and fall according to the success of the underlying business.
Stockholders are entitled to the profits, if any, generated by the company after everyone else—employees, vendors, lenders—gets paid. Because stockholders only get the profits left over after everyone else is paid, they shoulder more risk than bondholders (see below), who get paid a fixed amount regardless of how well a company does (unless it goes bankrupt). However, if a company generates lots of profits, shareholders enjoy the highest (theoretically unlimited) returns.
Companies usually pay out their profits to investors in the form of dividends, or they reinvest the money back into the business. Dividends provide shareholders with a cash payment, and reinvested earnings offer shareholders the chance to receive more profits from the underlying business in the future (perhaps in the form of future dividends and/or stock appreciation).
