Linux is a variant of Unix and was created by Linus Torvalds.
Linux is a fullfledged operating system, containing all parts that belongs to an operating system. Except a company standing for the development and selling of the product. Linux consists of a kernel, for which Linus Torvalds still makes the final decisions for. And a lot of free programs made by many volounters.
If you buy a copy of Linux, you are paying for the package of kernel and programs, and support. There are a lot of different packages - distributions of Linux, RedHat, Mandrake, Suse, TurboLinux, MicroLinux and more. Each of them containing a kernal and more or fewer programs. The programs can be very different. Ranging from editors to DHCP servers, from windows managers to line editors. A distribution can be so small that it can be stored on a single floppy disk, and be so big that it takes several CD-ROM.