A plugin is like a software version of a rackmount effect processor.  A plugin is a software effect processor that can be accessed by your software in it's effect loops.

There are many different types of software plugins, Direct X, VST, RTAS, AudioSuite, etc. Some types will only work with certain pieces of software. For instance, you want to make sure your software will support VST before spending money on VST plugins.

The difference between hardware effects and software plugins is that a rackmount hardware unit can only be used in one instance, all signals routed to it are effected the same. Software plugins can be used multiple times with multiple settings on each individual track.

Software plugins are usually a lot more affordable than hardware. Matter of fact there are a number of free software plugins on the web if you look around.

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