A spritesheet is a large image filled with smaller images. When you display each of the smaller images in the correct order, you get an animation. If you imagine an old celluloid movie reel, unrolled, chopped up, and laid out in a large square, you have the idea of a sprite sheet.
Sprite Sheet (also known as Atlas, or Texture Atlas) is an image file which contains many smaller images, evenly spaced, which usually comprise the frames of an animation.
Such an image makes it easier for various software to access specific frames within the image by coordinates. Sprite sheets are used extensively in 2D animations, allowing to group together frames of a specific movement of a character.
In unity3d Sprite sheets can be imported and used in the sprite editor to create animations in the scene, controlled by an Animator state machine.
An example of a sprite sheet can be seen here https://web.archive.org/web/20140715213314/http://gamemedia.wcgame.ru/game-sprite-sheet.html.
