What is money? Why do people use money?

Money is a current medium of exchange in the form of coins and banknotes. We use money so we can exchange goods and services with other people.

We need money because we want to exchange goods and services with other people. The barter system is insanely inefficient, because you often don't need what the other person has, so we need a medium of exchange. The requirements of a medium of exchange are that it be scarce and fungible (ie, one dollar is exactly as good as another). Other things that are desirable in a medium of exchange are that it be durable, storable, portable, easily divisible, easy to identify and hard to fake. Money meets all these requirements better than anything else that's been used.