Active Directory is the flagship directory product from Microsoft. The term directory here is used in the sense of a telephone directory -- i.e., a published listing of information, primarily about users, computers, groups and related policies.
Active Directory is the most popular directory product deployed internally to organizations, due to its tight integration with the Windows operating system, which enables users to sign into their Active Directory domain-attached Windows PC using their Active Directory password. Active Directory is also closely integrated with the Microsoft Exchange e-mail platform, both for authentication and as a platform where information about individual users and mail distribution lists may be stored.
Wikipedia has an excellent overview of Active Directory.