Furries are anthropomorphic animal characters with human personalities and characteristics, an example of this are the creatures from The Wind and the Willows, where the Animals in the book show human characteristics by dressing in clothes, owning furniture and speaking English (including other languages too).
The term Furry can also be used to describe the type of Lifestyle a person leads, see Furry Fandom for more info.
In Second Life, "furry" avatars are those which use prim attachments to take the appearance of a certain animal or mythical creature while keeping the basic humanoid framework.