In the context of computers, interpretation (or sometimes recompilation) of machine code from another platform.

Some warez idiots think of emulation as only good for game console ROM emulation. However, emulation is used for many great, non-gaming, and perfectly legal things. Such an implementation is demonstrated in vmware (though that's mostly native execution), the Crusoe processor, the Pentium's RISC core, and PowerPC Macintoshes.

Another simpler definition I've seen for emulation in computers is simply making a device act as another. Example: the "SCSI Emulation" feature in Linux will make an ATAPI device use a SCSI interface.