A plugin is a kind of Joomla! extension. Plugins provide functions which are associated with trigger events. Joomla provides a set of core plugin events, but any extension can fire (custom) events. When a particular event occurs, all plugin functions of the type associated with the event are executed in sequence. This is a powerful way of extending the functionality of the Joomla! Platform. It also offers extension developers a way to allow other extensions to respond to their actions, making extensions extensible.

The Joomla! plugin architecture follows the Observer design pattern. The JPlugin class provides the means to register custom plugin code with core or custom events. The JDispatcher class (JEventDispatcher in Joomla 3.x) is an event handler which calls all plugins registered for a particular event, when that event is triggered.

Reference: http://docs.joomla.org/Glossary

Files that gives you control over the display of modules or components.

Override files are placed in special folders and can be used in place of the standard layout files. Unlike Template Overrides, which override layout files of the same name, Layout Overrides are additional layout files that give you more options and control.