Fork is just a fancy name for a software or a protocol update. Updating the Bitcoin protocol or source code is referred to as Fork. Let's just say that, introducing new features into the Bitcoin protocol requires causing a fork in Bitcoin. The word fork in Bitcoin has a different and more complex meaning from the usual software development one.
For example, Litecoin is a Bitcoin fork. Someone decided to change the dials on a few of the features, thereby creating a version of Bitcoin with distinctly different properties. Most cryptocurrencies are derivatives of Bitcoin - there are notable exceptions.
Since Bitcoin is open source code anyone can fork Bitcoin and offer a new coin using the existing code e.g; Bitcoin Cash, Bitcoin Classic.
Bitcoin network is run by nodes, as of now there are 9526 nodes worldwide. All the nodes are in Bitcoin network because they all agree to a set of rules. If a node or few nodes decide to change the existing rule but the rest aren’t in agreement, then this creates a divide resulting in chain split.
Since Bitcoin is open source code anyone can fork Bitcoin and offer a new coin using the existing code e.g; Bitcoin Cash, Bitcoin Classic.
Basically, there are two types of forks;
Soft Fork
This kind of fork avoids permanent split that a hard fork introduces, and is applicable only when adding features that make validation rules stricter.
BitcoinWiki explains Soft Fork as;
A soft fork is a change to the bitcoin protocol wherein only previously valid blocks/transactions are made invalid. Since old nodes will recognise the new blocks as valid, a softfork is backward-compatible. This kind of fork requires only a majority of the miners upgrading to enforce the new rules.
For example; a change that was made via soft fork is pay-to-script-hash. Pay-to-script-hash was not present in the first version of the Bitcoin protocol. This is a soft fork because the old nodes would still be able to verify a valid pay-to-script-hash transaction.
Hard Fork
A type of fork that renders previously invalid transactions valid, and vice versa. This type of fork requires all nodes and users to upgrade to the latest version of the protocol software. This fork is not backward-compatible.
For example; you want to open a MS Word 2010 file in MS Word 2007 software. You wont be able to do so because it's not backward-compatible.
