Gray matter is the collective term for the cell bodies of neurons; the term white matter refers to the axons. The cell bodies got this name because they look gray under a certain kind of stain. The cerebral cortex is comprised (almost but not quite entirely of) gray matter, as are the subcortical structures.

Some people use "gray matter" as a colloquial term for the brain in general. "Use your gray matter!" means "Think, damnit!"

The portions of the brain and spinal cord which appear gray and composed of the main bodies of neurons (called cytons). This is in contrast to white matter, which is the portions that are white and composed of the axons and dendrites of neurons.

In the spinal cord, the gray matter is bordered by the white matter and is shaped like a butterfly when seen in cross-section.

From the BioTech Dictionary at http://biotech.icmb.utexas.edu/. For further information see the BioTech homenode.