Generally speaking, artificial intelligence (AI) is the human-like intelligence that is exhibited by machines or computers. AI can weigh the pros and cons of complex decisions and tell you which one is best, without you having to do all the thinking.
Similarly, it can learn new things without much intervention, and understand spoken language as well as the text of a book, just like an intelligent human can. Basically, AI can holistically assess any situation it finds itself in, and make mental calculations/decisions like a human being sometimes even better, as we will see later.
The chess playing computer software is making use of AI, and so is the automatic vacuum cleaner. As you can already tell, AI has vast applications in nearly every field. Using AI, we have already automated much of the stuff that only humans could ever do. Now a computer can play chess better than humans, for instance. This implies that we have instilled some of our human intelligence into the AI!