^^^ This, but what he forgot to add is that if you have not even got the initiative to find out for yourself (at least google it before you ask) then you are well and truly fucked.
Niche is a more defined area of a broader market. As mentioned above if you take the market of Electronics you could break it down to a Niche which would be Mobile Phones. You could take it even further to Blackberry Bold and even further to a Micro Niche Blackberry Bold Headsets.
The idea is to find a niche that contains people looking for a solution to their problems or looking for a specific product. Build a good SEO niche site with a solution to the consumers problems and you can make a nice little income from it.
It's a combination of few things.
1st: It's a segment of people you are targeting for your product.
2nd: That segment should be specific Eg.
Computers>laptops>Dell>Dell Inspiron Series>Dell Inspiron N5010
Now "Dell Inspiron N5010" is your Niche and you can use it as keyword for your site or page. And these keywords are called "Niche Keywords".
I am myself a new member here and if their is something wrong is the explanation I request to please correct me.