Wrapped Token
A token on one blockchain that represents an asset held somewhere else, so the asset can be used where it does not natively exist.
There are two families. In the custodial form, an institution holds the underlying asset and issues a matching token on another chain, redeemable by approved parties; wrapped bitcoin on Ethereum works this way. In the contract form, the underlying is deposited into a contract on the same chain that mints a standard token against it; wrapped ether exists because ether predates the ERC-20 standard and many contracts only accept that interface. Assets moved by bridges are also wrapped representations rather than the original units. The wrapper inherits the risk of whatever holds the underlying, so a custodian failure, a bridge exploit, or a redemption freeze can leave the representation circulating with an impaired claim behind it.
In practice
Wrapped ether is minted by depositing ether into a contract that returns an ERC-20 token, and burned by withdrawing the ether again.
The common misunderstanding
A wrapped token is a claim on an asset, not the asset itself; if the custodian, bridge, or contract holding the underlying fails, the wrapper can keep trading with nothing recoverable behind it.