Altcoin is the combination of 'alternative' and 'coin', referring to cryptocurrencies that were created as alternatives to bitcoin. Several thousand altcoins exist today with the most notable being Ethereum's ether (ETH), XRP, and Litecoin (LTC).
Once Bitcoin proved itself as a functioning system, altcoins started to emerge with the first being Namecoin (NMC). Namecoin is not intended to be a currency like bitcoin but instead uses the immutable nature of the blockchain to create websites with a .bit domain and are stored on each computer in the Namecoin network.
Altcoins tended to tweak the parameters of the Bitcoin system. For example, Litecoin reduced the block confirmation time and increases the supply and transaction speed while Dogecoin (DOGE) removed the fixed supply and introduced a slightly inflationary system.
Later on, altcoins gradually moved away from tweaking the Bitcoin code base and creating new cryptocurrencies from the bottom up. For instance, Ethereum's Ether is the best example since the team developed their own mining algorithm and blockchain architecture (you can read more about the differences Bitcoin and Ethereum in our Help Centre). XRP is another notable example which uses the Ripple Consensus System instead of mining and Proof of Work.
Cryptocurrency forks are also relevant when talking about altcoins. Many of the altcoins in existence due to a code fork (e.g., taking Bitcoin's code, modifying it and creating a new blockchain such as Litecoin did) or due to a hard fork (e.g., a split in the community that results in the creation of a new blockchain/coin that has a shared history with another coin, such as Bitcoin Cash).
Since bitcoin is the funding currency of the cryptocurrency market, has higher liquidity and enjoys a first-mover advantage, altcoins tend to exhibit more price volatility and lower trading volume. Altcoins rely on exchanges for price discovery, where exchanges may de-list coins based on low volume and weak interest, while they may add others based on high demand. Altcoins are listed on exchange under tickers, which are usually three or four letters (e.g., Ether is ETH, Litecoin is LTC, and so on).
The innovation behind a coin and marketing is also important to drive adoption and demand. In the long run, altcoins will only survive if they implement useful features and manage to retain the interest of businesses, investors, and traders.