What does $PATH mean?

Run in a terminal:

echo $PATH

or

printf "%s\n" "$PATH"

what you see is a list of directories, looking like:

/home/jacob/bin:/usr/local/sbin:/usr/local/bin:/usr/sbin:/usr/bin:/sbin:/bin:/usr/games:/usr/local/games

If you put an executable in either one of these directories, you do not need to set the path to the executable / script, but you can run it by its name as a command.

Executables in $PATH should not have a language extension by convention (although they would work)

Editing your $PATH variable

You can (permanently) add a directory to $PATH by adding the following line to your ~/.profile file (invisible by default, press Ctrl+H in the file manager to make it visible):

export PATH=$PATH:/path/to/dir

More usefull information on environment variables

(such as $PATH) can be found here (thanks for the suggestions @Letizia)

$PATH is a environment variable that is file location-related.

When one types a command to run, the system looks for it in the directories specified by PATH in the order specified.

You can view the directories specified by typing echo $PATH in the terminal.

Suppose there is a executable file foobar01.sh present at /home/user/foo1/foo2/foobar01.sh which you want to execute on a regular basis. typing the entire "path" would be time consuming. So we add the directory in to $PATH variable and we can execute foobar.sh directly without even specifying the path.

You can add it to $PATH by typing the following command:

export PATH=$PATH:/home/user/foo1/foo2