A smart contract is not what its name suggests - it's not intelligent and it's not really a legal contract in the traditional sense. It's code, a set of instructions that says 'if this happens, then do that,' running on a network that no single party controls.
The concept of a smart contract was first proposed by computer scientist and legal scholar Nick Szabo in the 1990s. He defined it as a set of promises specified in digital form and the protocols within which the parties perform on those promises.
Ethereum turned this theoretical idea into practical reality with its launch in 2015, providing a blockchain designed from the start to run arbitrary programs. Today, most smart contracts are built on Ethereum or similar networks.
The key properties of a smart contract include automatic execution, determinism, and trustlessness. It can hold and move large amounts of value, run on a network no single party controls, and its actions are permanently recorded and visible.