A Live CD, (or DVD, or USB external disc) is a CD containing a bootable computer operating system. With most Live CDs, that operating system is a version of Linux.
A Live CD contains a complete version of the operating system and (usually) a number of applications. You insert the CD into any standard Windows PC and reboot the system, and then your computer will boot from the CD, not from your hard disk. (You may have to change the settings in your computer's BIOS to change your computer's boot order.) The operating system on the Live CD (normally Linux) will load and become operational without touching any information stored on your hard drive. It is a great way of taking a new operating system for a "test drive."