A creature of mythology, often conceived of as a small, ugly, cruel (or at least mischevious) humanoid. Also popular in RPG's and modern fantasy, where they typically play second bannana as a weak member of the Orc family, and are used as cannon fodder for hack-'n'-slash adventuring.
The modern fantasy role of the goblin stems from the writings of Tolkien. Goblins were featured in J.R.R. Tolkien's The Hobbit, but the term was later downgraded to an alternate name for an Orc. Curiously, with the release of The Lord of the Rings into the movie world, the term has again been used to indicate a different race; in the movie version of The Fellowship of the Ring, Gandalf says that Saruman has cross-bred Orcs and Goblins to produce his race of powerful servents, the uruk-hai. In the book, Gandalf claims that Orcs and Men were the ingredient races.
Growing out of Tolkien's use, goblins became stock opponents for role playing games- starting with the granddaddy of them all, Dungeons and Dragons. In D&D and the later AD&D, Goblins are weak, flat-faced, short and ugly humanoids that hate light and dwarves, and like cowardice, treasure, and conflict. With very weak statistics and poor organization, they are easy targets for even weak, low-level adventurers, and are generally given little respect or attention. In a slight break with some other games and fantasy worlds, D&D goblins are more closely related to hobgoblins and bugbears than to Orcs- particularly in the much-beloved (and overused) Dragonlance campaign world.
In the Warhammer world (also Warhammer Fantasy Roleplay), goblins are closer to the goblins of The Hobbit. They are sneaky, cruel, green-skinned little beasties that live largely underground, hate dwarves, fear elves, and spend most of their time being slapped around by larger orcs. Goblins are unpredictable, cowardly, and opportunistic (quite likely to flee from combat in Warhammer tabletop games). Like in D&D, they are a danger only because of their large numbers. In the Warhammer world there are also two sub-species of goblins: the Night Goblin, and the Forest Goblin. The first are goblins that live entirely underground, often in abandoned or captured dwarf fortresses, enjoy consuming psychotropic mushrooms, and create a wide variety of bizarre and unpredictable war machines. Forest Goblins, on the other hand, are primitive wilderness dwellers, whose main distinguishing schtick is that they raise and ride giant spiders that are capable of moving quickly through difficult terrain. A crusade of violence undertaken by a force of goblins and orcs is called a Waaaaaagh!. Nicknames for goblins in Warhammer (and some other fantasy realms) include gobbo, greenskin, and sneaky git.
For another interpretation, try the old movie Labyrinth. David Bowie as a goblin. Look into it.
Goblin can also be used as a sort of generic term for any monster of fiction or mythology that is humanoid, not undead, at least somewhat intelligent, and not friendly. As in "Ghosts and Goblins" coming out in Halloween.