A guest star
is a person who is reasonably famous
and slumming it on a television
show for at least one episode. A show will usually tell you when they have a guest star, as noted by the "guest starring X" line in the title credits. The important thing to note is that the guest star usually has to have a decent amount of screen time, otherwise it is a cameo
There will also be a fairly decent amount of attention paid to the fact there is a guest star before the show is aired - the idea is to get people who don't normally watch the show to come and see their favourite celebrity, and hopefully they will come back to watch the rest of the show without the guest star.
In some cases guest starring in a show is not about the paycheck but more the fact that an actor gets the chance to be in a show they like. As an example a lot of actors were keen to be in Doctor Who (especially since by the end some of the actors were people who had fond memories of watching it as a child).
Something I found amusing was the billing of Heather Locklear as a guest star in Melrose Place - apparently this was kept right to the end. How can you guest star in EVERY episode? Oh well, television isn't meant to make sense....