Unlike Bitcoin, Ethereum is an open source, public platform for creating Decentralised Applications (Known as Dapps) by making use of Smart Contracts on the Blockchain. The concept of Ethereum first came up online in 2013 by Vitalik Buterin, an early Bitcoin programmer. Further, the crowd sale for Ethereum happened in July 2014, and the Blockchain network went live a year later in July 2015.
Ethereum lets you store and retrieve data securely on the blockchain in the form of smart contracts. Ethereum is a platform for building programmable blockchain on a large scale. Ethereum can be used to create decentralised finance solutions which can be transparent, trustworthy and cryptographically secure at the same time.
Smart Contracts themselves do not equate to the real world understanding of contracts. It is the contract that establishes the connection between cryptographic codes. Smart Contracts are pre-defined conditions which get triggered once the conditions have met. The execution will happen once it is established since everything happens on the Blockchain.
One Real world use of Smart Contracts is in the insurance industry. A Decentralised application can be created on the Ethereum Blockchain by the insurance company for natural disaster payouts. Once an earthquake or a hurricane is detected in a particular region, the decentralised app will release payments to those who are in that specific region. Since this happens on the Blockchain and not controlled by an individual, you are bound to get that money.
Ethereum can be used to build even more complex decentralised apps. An example would be to have social networking platforms where the user data is not exploited and controlled by a single entity. The options for applications on the Ethereum Blockchain is endless. We already have platforms like EtherDelta which is a decentralised exchange, running entirely on the Blockchain. Running apps on the Ethereum Blockchain reduces costs, removes points of failures and prevents censorship.
Initial Coin Offerings (ICO) happens majorly on the Ethereum Blockchain. Companies can use the Ethereum Blockchain to raise money. When a company is raising money, anyone can contribute using Ethereum for payments, and the company automatically issues tokens which can be traded in the form of smart contracts. The limit of an ICO and cost for each token is programmed into the Ethereum Blockchain. It automatically issues the tokens once money is received.