What is Beta Software?

A beta version is the first version released outside the organization or community that develops the software, for the purpose of evaluation or real-world black/grey-box testing. The process of delivering a beta version to the users is called beta release.
The users of a beta version are called beta testers. They are usually customers or prospective customers of the organization that develops the software. They receive the software for free or for a reduced price, but act as free testers.
Beta version software is likely to be useful for internal demonstrations and previews to select customers, but unstable and not yet ready for release.