A prion is an infectious protein. The word is short for "proteinaceous infectious particles".
Prions cause many forms of encephalitis, or brain disease, such as scrapie, Creutzfeldt-Jakob Disease (Bovine Spongiform Encephalopathy) and kuru. Prions work by changing the shape of proteins in the infected animals. While normal proteins have lots of alpha helices, or twisted parts, changed proteins have lots of beta sheets, or flat parts. The word is pronounced pree-on.
Because prions are proteins, and proteins cannot reproduce themselves, it is a mystery how prions work. A lot of molecular biology research is going on to find out how they reproduce themselves, with no clear result so far.