A Unix system provides a number of network services ``out of the box'' and a wealth of services that you can set up later. These services are controlled by processes called daemons.
A daemon is a process running in the background which performs some system-related task, whether a network service, or some other service. Some daemons start at boot time and continue running as long as the system is up, while others start when they are needed and only run until their task is completed.
In the beginning, all daemons started at boot time and ran until shutdown. This became a problem as more and more daemons were added to the system. For each network service provided, a daemon had to run, listening on its specified port, waiting to receive a connection and start its work. All of these daemons running continuously wasted system resources such as swap space.
To deal with this problem, BSD developed inetd, one daemon which listens on the ports of many network services and, upon receiving a connection, starts up the service's corresponding daemon, which runs only until its task is complete.
This tactic improved the situation tremendously, so much so that now every Unix includes inetd and most network services are under its control.
Terms used:daemon, inetd, boot, shutdown, BSD, inetd.