An ontology defines the terms used to describe and represent an area of knowledge. Ontologies are used by people, databases, and applications that need to share domain information (a domain is just a specific subject area or area of knowledge, like medicine, tool manufacturing, real estate, automobile repair, financial management, etc.). Ontologies include computer-usable definitions of basic concepts in the domain and the relationships among them ...
They encode knowledge in a domain and also knowledge that spans domains. In this way, they make that knowledge reusable.
Working Draft, Web Ontology Working Group.