Stands for "Blue Screen of Death." The BSOD is an error message displayed by Windows when a non-recoverable error occurs. The "blue screen" refers to the blue background color that fills the entire screen behind the error message. It is called the "blue screen of death" because it is displayed when the computer has encountered a "fatal error" and must be restarted.
Technically, the BSOD is caused by a Windows STOP error. STOP errors are critical system-level errors that cause the computer to stop responding in order to prevent data corruption or damage to the hardware. Several different problems can cause a STOP error, including kernel crashes, boot loader errors, driver malfunctions, and hardware faults. When a STOP error occurs, the BSOD is displayed, along with a message that provides information about the specific error that has occurred.
The good news is that the BSOD protects your data and prevents damage to your PC. The bad news is that it halts the entire system, which may cause you to lose unsaved files that you were currently working on. In some cases, the BSOD will produce a "memory dump" of the current data stored in RAM, which is saved to the primary storage device. This dump can be opened and analyzed after the computer is restarted, though it is often difficult to extract usable data from this file. Your best chance of recovering work after a BSOD is if the application you were using includes an "autosave" feature that saves a temporary version of your work at regular intervals. If your computer crashes while you are working, the program should automatically open the temporary file the next time you launch the program.
NOTE: In Windows 8, the blue screen of death has a softer "aqua" blue background and often provides more readable error messages than in previous versions of Windows. However, the computer still must be restarted when the BSOD is displayed.
Updated: June 14, 2013