(Or "source", or rarely "source language") The form in which a computer program (software) is written by the programmer. Source code is written in some formal programming language which can be compiled automatically into object code or machine code or executed by an interpreter.
If you have the source code for a program rather than just its compiled, executable form, then you can, with the right tools, modify it to fix bugs or add new features. This is the basis of the open source philosophy - empowering people to improve the software they use for the benefit of themselves and others.
The Jargon File would have us believe that an old-time hacker might refer to source code informally as "English", with the implication that to him his favourite programming language is at least as readable as English.