What is a Theme?
Fundamentally, the WordPress Theme system is a way to “skin” your WordPress site. Yet, it is more than just a “skin”. Skinning your site implies that only the design is changed. WordPress Themes can provide much more control over the visual presentation of your content and other data on your WordPress site, as well as behavior of certain site’s elements while interacting with visitors.
A WordPress Theme is a collection of files that work together to produce a graphical interface with an underlying unifying design for a website. These files are called template files. A Theme modifies the way the site is displayed, without modifying the underlying software. Themes may include customized template files, image files (*.jpg, *.png, *.gif), style sheets (*.css), custom Pages, as well as any necessary code files (*.php). For an introduction to template files, see Template Files.
Let’s say you write a lot about cheese and gadgets. Through the use of the WordPress Loop and template files, you can customize your Cheese category posts to look different from your Gadgets category posts. With this powerful control over what different pages and categories look like on your site, you are limited only by your imagination. For information on how to create custom look for various templates in your theme, take a look at Template Hierarchy.