An Android emulator is software which simulates the functionality of an Android device running the Android OS. Emulator allows developers to develop and test applications without the need of various real devices with different configurations.
The Android emulator is a virtual mobile device running on your computer. The software emulates an Android device, running the Android OS, for debugging applications without needing a variety of devices and OS versions. The Android emulator has various settings to make possible the emulation of a large set of Android devices.
See also genymotion, a third-party Android emulator that provides a very fast and feature rich alternative to the ADT emulator.