Per the request of fellow forumite, I am starting this thread. It is meant to be a living document so everyone is encouraged to contribute. Also, what I say isn't golden. If I make a mistake, someone please keep me honest.
Here it goes:
Search Engine Marketing (SEM), in lay-man's tems is what you do on your site, in order to promote it, to ensure that it ranks highly in search engines (google, yahoo, etc). The goal is here to reach certain metrics (converting visitors to buyers, getting people to spend more time on your site, etc).
It comprises PPC (Pay Per click, the ads you see at the top and to the right side on google for example. More on this is another post) and Search Engine Optimization (SEO) which is what you do, that doesn't cost you a thing, on your actual site to ensure high rankings (content on your site, layout of your site, load time of your pages, etc)
This is pretty much it for a first post. make sense? I would rather a majority say it does before moving forward. Again, others are free to chime in.