Literally, rule by the people. The term is derived from the Greek demokratia, which was coined from demos (“people”) and kratos (“rule”) in the middle of the 5th century B.C to denote the political systems then existing in some Greek city-states, notably Athens.

Democratic Institutions
For thousands of years the kind of association in which democracy was practiced, the tribe or the city-state, was small enough to be suitable for some form of democracy by assembly, or “direct democracy”.
Much later, beginning in the 18th century, as the typical association became the nation-state or country, direct democracy gave way to representative democracy —a transformation so sweeping that, from the perspective of a citizen of ancient Athens, the governments of gigantic associations such as France or the United States might not have appeared democratic at all.

Ideal Democracy
Aristotle found it useful to classify actually existing governments in terms of three “ideal constitutions.” For essentially the same reasons, the notion of an “ideal democracy” also can be useful for identifying and understanding the democratic characteristics of actually existing governments, be they of city-states, nation-states, or larger associations.
It is important to note that the term ideal is ambiguous. In one sense, a system is ideal if it is considered apart from, or in the absence of, certain empirical conditions, which in actuality are always present to some degree. Ideal systems in this sense are used to identify what features of an actual system are essential to it, or what underlying laws are responsible, in combination with empirical factors, for a system's behavior in actual circumstances. In another sense, a system is ideal if it is “best” from a moral point of view. An ideal system in this sense is a goal toward which a person or society ought to strive (even if it is not perfectly attainable in practice) and a standard against which the moral worth of what has been achieved, or of what exists, can be measured.

These two senses are often confused. Systems that are ideal in the first sense may, but need not, be ideal in the second sense. Accordingly, a description of an ideal democracy, such as the one below, need not be intended to prescribe a particular political system. Indeed, influential conceptions of ideal democracy have been offered by democracy's enemies as well as by its friends.