Doctorate of Philosophy
Doctor of Philosophy, or Ph.D. (an abbreviation for the Latin "Philosophiæ Doctor"; or alternatively Doctor philosophiæ, D.Phil.), was originally a degree granted by a university to a learned individual who had achieved the approval of his peers and who had demonstrated a long and productive career in the field of philosophy. The appellation of "Doctor" (from Latin: teacher) was usually awarded only when the individual was in middle age. It indicated a life dedicated to learning, to knowledge, and to the spread of knowledge.
The degree was popularized in the 19th century at the Friedrich Wilhelm University in Berlin as a degree to be granted to someone who had undertaken original research in the sciences or humanities. From here it spread to the U.S., arriving at Yale University in 1861, and then to the UK in 1921. This displaced the existing Doctor of Philosophy degree in some Universities; for instance, the D.Phil. (higher doctorate in the faculty of philosophy) at the University of St Andrews was discontinued and replaced with the Ph.D. (research doctorate). However, some UK universities such as Oxford, York and Sussex retain the D.Phil. appellation for their research degrees, as does the University of Waikato in New Zealand.
Some ability to carry out original research must be documented by producing a dissertation or thesis of book length. The degree is often a prerequisite for permanent employment as a university lecturer or as a researcher in some sciences, though this varies on a regional basis. In others such as engineering or geology, a doctoral degree is considered desirable but not essential for employment. In a small but growing number of fields, the doctorate is felt to injure employment prospects by causing 'overqualification' for the job.
In layman's terms, it's someone who has spent a large amount of time doing research in a particular field, usually on a very specific subject, and been able to demonstrate that they have an advanced understanding of that subject -- particularly their specific research area.