The simplest definition I can think of is that PLM is responsible for managing the virtual product. In comparison, solutions such as Enterprise Resource Planning (ERP), and Manufacuring Execution Systems (MES), are mainly responsible for managing the physical product.
Managing the virtual product is important because product innovation is achieved during the early phases of product development. Once the physical product is being developed, it is very hard and very expensive to infuse any product innovation into the final product.
PLM employs many kinds of software technologies to provide support for the virtual product. Solutions such as 3D CAD modeling, Finite Element Analysis, 2D and 3D visualization tools, collaborative social platforms, and links to suppliers are all important parts of PLM.
Increasingly, software, electronic systems, and 3D CAD models are being brought together with Systems Engineering tools to provide a comprehensive view of the entire product. This allows testing to be done on the virtual product, reducing or eliminating the need for expensive prototypes.
Not only does PLM support the early development of the virtual product, it continues to support the virtual product as the physical product is manufactured; keeping track of updates and changes throughout the life of the product. This means that once the product is manufactured, sold, and delivered to the customer, PLM is still there updating itself whenever there is a change. Once in the field, there might be warranty changes, or product updates, or other changes that impact the virtual product.
When the virtual product matches the real physical product out in the field, it becomes easy to create new derivative products, and it is much easier to develop innovative new products based on customer input. Improvements of this type lead to more successful new product introductions and a better ability to deliver a higher quality product, to the right market at the right time.