What is a Content type in SharePoint?

A reusable collection of settings to apply to a certain category of content such as documents and folders. Content types are designed to help users organize their SharePoint content in a more meaningful way. 

Imagine a business situation in which you have three different types of documents: expense reports, purchase orders and invoices. All three types of documents have some characteristics in common for one thing; they are all financial documents and contain data with values in currency. Yet each type of document has its own data requirements, its own document template, and its own workflow. One solution to this business problem is to create four content types. The first content type, Financial Document, could encapsulate data requirements that are common to all financial documents in the organization. The remaining three, Expense Report, Purchase Order, and Invoice, could inherit common elements from Financial Document. In addition, they could define characteristics that are unique to each type, such as a particular set of metadata, a document template to be used in creating a new item, and a specific workflow for processing an item