In the simplest terms, an algorithm is a set of rules for carrying out some calculations to solve a problem. It is designed to yield results for any valid input according to precisely defined instructions. If you look up the word algorithm in an English language dictionary (such as American Heritage), it defines the concept as follows:
"An algorithm is a finite set of unambiguous instructions that, given some set of initial conditions, can be performed in a prescribed sequence to achieve a certain goal and that has a recognizable set of end conditions."
Designing an algorithm is an effort to create a mathematical recipe in the most efficient way that can effectively be used to solve a real-world problem. This recipe may be used as the basis for developing a more reusable and generic mathematical solution that can be applied to a wider set of similar problems.