In chemistry this term refers to a chemical reaction that generates heat rather than absorbs it. Interstingly enough, in biology, the term means the exact opposite, as it is a characteristic of animals that get most of their body heat from their surroundings, rather than generating it internaly. This writeup focuses mainly on the biological concept, also referred to as being cold-blooded or poikilothermic.
Found in all living reptiles, fish and insects, the animal takes on the temperature of its surroundings.
The big advantage to being exothermic is that the animals save a huge amount of energy. In contrast, endothermal or warm-blooded animals use roughly one third of the energy they ingest for heating. The big disadvantage in being exothermic is that moving, digesting and reproducing generaly use more energy and take longer to start up.
Look at it as a trade-off. on the one side is being able to survive on a fifth of the amount of food (say for a 1-meter long snake about a mouse a week) that an comparable endotherm animal would need. On the other hand, before an exothermic animal can move efficiently, digest its prey, etc. it needs to warm up the whole system. This can be a big disadvantage if the reason you want to move is because you are about to be eaten...
In short, in climates where the ambient temperature is quite high anyway, such as in the tropics, exothermic animals have a distinct advantage, whereas they cannot survive in colder climates as well as an animal with a good internal heating system can.
Note from the author: Animals that are exothermic can be ectothermic at the same time. Ectothermic animals are exotherms that keep their bodytemperature fairly constant by basking, shivering, or moving to a place where the ambient temperature is close to the temperature they wish their body to have. The proper term for cold-blooded is exothermic though (physiological state), not ectothermic (which refers to behaviour)!