A resident's visual representation in Second Life is through a 3D avatar. Avatars in SL can be uniquely customized to an extreme degree through use of built-in sliders (see Appearance Window) and/or objects that are created in SL and attached.
All resident avatars start out in a male or female bipedal "shape" (shape is a word used to describe changes made to the avatar mesh via the appearance sliders). Although the appearance menu allows for drastic changes to be made, the avatar mesh remains humanoid. To make up for this fact, many residents have taken to changing the avatar into other creatures by attaching prims to the avatar.
Avatars can also be controlled through resident-created animations. With animations and attachments, an avatar can become virtually anything. Avatars can also wear clothing which can be made in the appearence window and have a texture applied to the item.
An avatar is not the same thing as an agent, yet they are sometimes incorrectly used interchangably. An avatar is the visual representation of a resident while an agent is the informational representation of a resident. Agent information is used by simulators, scripts, and objects to track where an agent is, what it is doing, and what items it owns (among other things).
See: Avatar History