Matter in the known universe can be classified in terms of four states: solid, liquid, gaseous, and plasma. The basic distinction between solids, liquids and gases lies in the difference between the strength of the bonds that hold their constituent particles together. The equilibrium between particle thermal (=random kinetic) energy and the interparticle binding forces determines the state. Heating of a solid or liquid substance leads to phase transition to a liquid or gaseous state, respectively. This takes place at a constant temperature for a given pressure, and requires an amount of energy known as latent heat. On the other hand, the transition from a gas to an ionized gas, i.e., plasma, is not a phase transition, since it occurs gradually with increasing temperature. During the process, a molecular gas dissociates first into an atomic gas which, with increasing temperature, is ionized as the collisions between atoms are able to free the outermost orbital electrons. Resulting plasma consists of a mixture of neutral particles, positive ions (atoms or molecules that have lost one or more electrons), and negative electrons. In a weakly ionized plasma the charge-neutral interactions are still important, while in strongly ionized plasma the multiple Coulomb interactions are dominant.
Because some or all particles are electrically charged and capable of creating and interacting with electromagnetic fields, many phenomena not present in ordinary fluids and solids can be found in plasmas. A plasma is a conductor of electricity, but a volume with dimensions greater than the so-called Debye length exhibits electrically neutral behavior. At a microscopic level, corresponding to distances shorter than the Debye length, the particles of a plasma do not exhibit collective behavior but instead react individually to a disturbance, for example, an electric field. See theoretical plasma physics for more information about kinetic theory and cold/warm/hot plasma models.
On Earth, plasmas usually do not occur naturally except in the form of lightning bolts, which consist of narrow paths of air molecules of which approximately 20 percent are ionized, and in parts of flames. The free electrons in a metal can also be considered as a plasma. Most of the universe, however, consists of matter in the plasma state. The ionization is caused by high temperatures as described above (e.g., inside the Sun and other stars), or by radiation, as in interstellar gases (e.g., solar wind) or, closer to the Earth, in the ionosphere and magnetosphere.
See also Wikipedia on plasma.