Super Beginner’s Guide to Ethereum

>In order to send any transaction on Ethereum, you are required to pay a small fee to the Ethereum network. We call the amount used to pay these fees “gas” (like money for gas to make your car run). The network sets the “gas price” (the amount required to transact on the system). Generally, the more gas you include in your transactions, the faster it will be processed.

The gas terminology is confusing, so many people get it wrong. Someone on HN mentioned 'gas' should have been called 'cycles' to make its meaning clearer.

Gas is how much Ethereum network resources (EVM operations, reads/writes to state, etc) a transaction uses. The amount of gas each EVM instruction uses is hardcoded in the protocol. The gas price is how much ETH each unit of gas costs. This is negotiated between miners and users in the market. The higher price you offer, the more likely your transaction will be picked up by a miner.