For something more in-depth, demos are recording of the game within the game engine, either from one players perspective or the servers perspective - a server prescriptive demo can be viewed from any angle and you can relive the game as if you are spectating in real time, as opposed to a players perspective where you are restricted to what that player witnessed during the game.
Generally speaking, demos are much smaller in terms or recording size than video capture technology like FRAPS and doesn't impact on a players frames per second, essentially you can play the game recording a demo, then come back and make a recording of that demo with video capture technology. Basically this means that while recording you don't have to worry about a single 30 minuet game leaving a multiple gigabyte recording on your hard-drive taped at lower settings to increase performance - any good game has demo recording functionality.