In the Harry Potter series, a muggle is a human with no magical abilities. Most muggles do not know that witches and wizards exist, apart from the ones who have connections with wizarding families i.e. muggles that have relations that are witches or wizards or muggles that have married a witch or wizard.
In the Harry Potter series, a witch or wizard that is born to muggle parents is known as a 'muggle-born'. Witches or wizards that have no muggle ancestory are known as 'pure-bloods'. A witch or wizard that is from mixed parentage i.e. one parent magical, one not, is a 'half-blood'.
J.K. Rowling created the word 'muggle' from a combination of the words 'mug', and 'muddle'. 'Mug' is a derogatory term for a person who is easily fooled, hence the name being used in the first part of 'muggles', who are easily fooled by wizards.
'Muggle' is now in the Oxford English Dictionary, and is used to describe a person who lacks skill.
