A license (sometimes licence), is a document or agreement giving permission to do something. The spelling license is usual in American English. In British English, licence is the noun form, and license is the verb, so a when a licensee has a licence, they are licensed. In Canadian English, the spellings denote different meanings (eg: a licence to drive would refer to a legal permission, whereas a license to drive could refer to a permission of circumstance).
In law, the document is the evidence of a license to be distinguished from the underlying license which is the actual permission to an act in a way that would be otherwise unlawful. Originally in reference to property, a license was the right of an individual to enter upon the property of another to do an act that would have otherwise been considered illegal such as walking in the woods, hunting game or swimming in the lake. To be distinguished from a license coupled with an interest which is an irrevocable license that granted some interest in land or in a chattel. Such a license could be enforced with an injunction. Licenses can be gratuitous, revokable at will (sometimes called a bare license) or a type of bailment.
Computer users may think of licenses as in reference to end user licence agreements (EULA) that are either proprietary and created as the result of a contract of sale or gratuitous as in open source software.
The holder of a copyright may (and often does) require that a license be accepted as a condition of being allowed to reproduce the copyrighted work.
This is common in commercial computer software. Unlike most goods, but like other intellectual property (such as books, movies, and music), computer software is generally regarded as being licensed, not bought. (The person who purchases a book normally owns the atoms, but not the text.) This means that the licensee has fewer rights than someone who has purchased the underlying creative work. (A publisher who buys a book (the text) may typically republish it under a new title, but a consumer who buys a book (the atoms) may not.)
Software licenses are often highly restrictive, and most software users do not bother to read them in full. So-called "shrink-wrap" licences and "click-through" licences are common. Most limit the number of computers the software can be installed on, the number of users that can use the software, and apply other limitations that are not inherent in the technology. As a result, huge fortunes have been made by selling goods that have a minimal cost of reproduction on a per-item basis.
So-called free software licenses and open source licenses are a reaction to what many see as the unfair restrictions of commercial software licenses.