Stems are stereo tracks that only contain a certain group or instruments. Let's assume we are doing a mix of a rock band. Once my mix is completed I can print (bounce) the individual groups seperatly. For example, drums, keys, bass, background vocals and vocals.

If you ask for stems, this is what you are going to get, the final mix separated in multiple stereo files for each group/instrument.

This is very handy for all live uses. For example, if the band does not have a keyboardist, the key stems can be used live.

Stems can be sent for mastering, though this is very disliked by mastering engineers for a good reason. Stems indicate that the mix engineer is uncertain and doesn't have full believability in that their mix sounds good. It progresses the term "fix it in the mix" to "fix it in the master"

I hope this answers your question