This environment is something which you can think of as an operating system or say your Personal Computer.
Just like your PC which have it's own memory and CPU for computing and running a program or an application similarly the program needs the same kind of environment (think instances) to run the application. Depending upon your need you can configure and install the same over cloud. So basically, We are going to buy a computer which is going to run our application and then the same can be used by multiple users & process their requests. The capacity can be increased or reduced depending on the need.
Now coming back to AWS, as you already know it's Amazon Web Services and is mainly used for availing cloud computing services.
The basic terminologies which you will often come across are:
EC2 - Elastic Compute Cloud -> Just think of it as instance which can be configured as per the size requirement of CPU and processing power needed for the Operating System.
RDS - Relational Database Service -> Just think of it as memory which will be used to store your program, files, images etc.
S3 - This also can be used to store large files.
Cloudwatch - To monitor your instance and it's activity.
