Droids are robots: mechanical beings, often possessing artificial intelligence.
The two leading droid manufacturers are Cybot Galactica and Industrial Automaton.
Droids are typically treated as property. More advanced droids sometimes receive proportionally more respect. Some protest the status of droids as slavery. This is a contentious issue, owing in part to the difficulty of assessing levels of artificial intelligence, and determining which droids if any may be considered properly sentient.
Although emancipation of droids is a radical concept, some oppose memory wipes except for very simple droids.
The word "droid" is obviously a shortened form of "android". However, Star Wars fails to recognize the seemingly contradictory concept of a free society in which sentient beings such as C-3PO are considered property. Star Trek, for example, takes an entirely different perspective on the matter, as indicated in the Next Generation episode "The Measure of a Man". In that episode, a hearing is held to decide the fate of a sentient android, whom a Starfleet scientist believes is property. The message of the episode is epitomized in a quote from Guinan intended to make Jean-Luc Picard realize the severity of the situation:
"Consider that in the history of many worlds there have always been disposable creatures. They do the dirty work. They do the work that no one else wants to do, because it's too diffcult and too hazardous. With an army of Datas, all disposable, you don't have to think about their welfare, or you don't think about how they feel. Whole generations of disposable people."
...To which Picard responds: "You're talking about slavery."