Tor (short for The onion router) is a system intended to enable online anonymity. Tor client software routes Internet traffic through a worldwide volunteer network of servers in order to conceal a user's location or usage from anyone conducting network surveillance or traffic analysis.
Using Tor makes it more difficult to trace Internet activity, including "visits to Web sites, online posts, instant messages and other communication forms", back to the user and is intended to protect users' personal freedom, privacy, and ability to conduct confidential business by keeping their internet activities from being monitored.
"Onion routing" refers to the layered nature of the encryption service: The original data are encrypted and re-encrypted multiple times, then sent through successive Tor relays, each one of which decrypts a "layer" of encryption before passing the data on to the next relay and, ultimately, its destination. This reduces the possibility of the original data being unscrambled or understood in transit.