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Software is a series of instructions that tells the CPU what to do. It may tell the CPU to turn a part of the screen blue or to write a file to the hard drive. It's the software that tells the hardware how to do something useful.
There are two main types of software on a computer: the operating system and applications.
The operating system is the manager of the computer. It is sometimes called the OS for short. When the computer starts up (or boots up) the operating system is loaded into the RAM and the CPU. From there the OS manages the hardware resources, memory, peripherals, applications, as well as the primary user interface (called the GUI). The common operating system in most PCs today is Windows, however Apple computers have their own operating system called MAC OS and many computers run the open source operation system, Linux.
A typical computer will have a number of applications available to the user. Applications are the programs you run. The types of applications that run on the computer are practically endless, but some major applications include word processors, spread sheets, games, and internet browsers.