A demo is what you give to show how something works. You might give a demo of your fancy new espresso machine to your weekend guests, so they'll know how to use it.
Demo is short for demonstrate or demonstration. It can be a verb, as when a tech company demos its new tablet or laptop. It's also a noun: "The demo of that software was pretty interesting." In the music industry, a demo is a practice version of a song, meant to show a record label or music venue what a performer's music sounds like. This meaning's been around since the 1960s, while earlier it meant "a political demonstration."