Passive income is income that you don't have to work for (not anymore).
For example, if you own a profitable business that someone else manages for you, the income you receive from that business is passive income. Receiving royalty for intellectual property (music, books) or renting out real estate are also common examples of passive income.
Active income is income that you have to continually work for - for example, a 9 to 5 job. In this case, you exchange your time for money at a fixed rate.
Of course, it is much more desireable to have passive income than active income. If you have enough passive income to cover your living costs - you can consider yourself retired.
Enjoy life - don't sell your time cheaply!