In the context of Unix systems, daemons are process that run in the background attending to various tasks without human intervention.

A daemon process is usually defined as a background process that does not belong to a terminal session. Many system services are performed by daemons; network services, printing etc.

Daemon A background process that answers to requests of users. For example HTTPD is a HTTP daemon, that's the HTTP server which answers to web browsers (clients) requests.

Simply invoking a program in the background isn't really adequate for these long-running programs; that does not correctly detach the process from the terminal session that started it. Also, the conventional way of starting daemons is simply to issue the command manually or from an rc script; the daemon is expected to put itself into the background.

Here are the steps to become a daemon:

fork() so the parent can exit, this returns control to the command line or shell invoking your program. This step is required so that the new process is guaranteed not to be a process group leader. The next step, setsid(), fails if you're a process group leader.
setsid()
to become a process group and session group leader. Since a controlling terminal is associated with a session, and this new session has not yet acquired a controlling terminal our process now has no controlling terminal, which is a Good Thing for daemons.
fork() again so the parent, (the session group leader), can exit. This means that we, as a non-session group leader, can never regain a controlling terminal.
chdir("/") to ensure that our process doesn't keep any directory in use. Failure to do this could make it so that an administrator couldn't unmount a filesystem, because it was our current directory. [Equivalently, we could change to any directory containing files important to the daemon's operation.]
umask(0) so that we have complete control over the permissions of anything we write. We don't know what umask we may have inherited. [This step is optional]
close() fds 0, 1, and 2. This releases the standard in, out, and error we inherited from our parent process. We have no way of knowing where these fds might have been redirected to. Note that many daemons use sysconf() to determine the limit _SC_OPEN_MAX. _SC_OPEN_MAX tells you the maximun open files/process. Then in a loop, the daemon can close all possible file descriptors. You have to decide if you need to do this or not. If you think that there might be file-descriptors open you should close them, since there's a limit on number of concurrent file descriptors.
Establish new open descriptors for stdin, stdout and stderr. Even if you don't plan to use them, it is still a good idea to have them open. The precise handling of these is a matter of taste; if you have a logfile, for example, you might wish to open it as stdout or stderr, and open `/dev/null' as stdin; alternatively, you could open `/dev/console' as stderr and/or stdout, and `/dev/null' as stdin, or any other combination that makes sense for your particular daemon.
Almost none of this is necessary (or advisable) if your daemon is being started by inetd. In that case, stdin, stdout and stderr are all set up for you to refer to the network connection, and the fork()s and session manipulation should not be done (to avoid confusing inetd). Only the chdir() and umask() steps remain as useful.