It's the difference of volatility among different strike prices of options of the same underlyingsecurity. This is created most of the time in stocks by more demand and higher premium paid for puts than for calls. This is because the majority of the market is long the market at any given time and insurance (hedging) of portfolio risk is in high demand.
A smile-like shape formed on a graphic representation of variance in implied volatility across different strike prices of the option that has the same expiration date and underlying security. This is a graphical representation of the volatility skew.[click to read more]