Xorg is the open source implementation of X window system.
X window system (or X11 or simply X) is a software the provides framework to implement GUI environment for individual applications. GUI environment in the sense, creating and moving windows on a display device(such as screen) for individual applicaitons and interacting with those application windows through mouse and keyboard.
X was originally designed to use over network connections rather than attached display device. That means the X program which is running on some computer in a network can display it’s user interface on other system which is running X server. That means we can interact with the X program (runnign somewhere in the network) through X server graphical interface (running in our system), and this X server sends mouse or keyboard (or any input devices) events to the X program. This is X client/server mechanism.