An ICO(Initial Coin Offering) in the world of cryptocurrencies is nothing more than an instrument used to finance the development of new protocols. Some famous ICOs are Ethereum and Z-Cash.

When a company wants funding to improve their services, they go public. That's called IPO. When a person has a project and wants to fund it, he/she creates a token that represents their vision. if people believe in it, they will buy it as a way to support the project. That's an ICO.