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Nick Szabo is a computer scientist known for his research in digital contracts and digital currency. Although Szabo has repeatedly denied it, people have speculated that he is the one behind Satoshi Nakamoto, the designer of Bitcoins. The phrase and concept of smart contracts was developed by him with the goal of bringing what he calls the "highly evolved" practices of contract law and practice to the design of electronic commerce protocols between strangers on the Internet.
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The key property of a smart contract is simple: there is only a fixed number of parties.
Smart contracts are written using the Solidity language. A contract in the sense of Solidity is a collection of code (its functions) and data (its state) that resides at a specific address on the Ethereum blockchain.
Decentralized applications
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Wikipedia defines a corporation as “a company or group of people authorized to act as a single entity (legally a person) and recognized as such in law.” While The DAO is a group of people authorized to act as a single economic entity, no governmental body recognizes it as such.
Solidity
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Contracts live on the blockchain in a Ethereum-specific binary format called Ethereum Virtual Machine (EVM) bytecode. Contracts are typically written in some high level language such as Solidity and then compiled into bytecode to be uploaded on the blockchain. There are some high-level languages and compilers to generate this bytecode:
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Solidity is the DEV-created (i.e. Ethereum Foundation-created), Javascript-inspired language that can be used to create smart contracts on the Ethereum blockchain. There are other languages you can use as well (LLL, Serpent, etc). The main points in favour of Solidity is that it is statically typed and offers many advanced features like inheritance, libraries, complex user-defined types and a bytecode optimizer.
The best way to try out Solidity right now is using the Browser-Based Compiler.
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