Steganography is the hiding of a secret message within an ordinary message and the extraction of it at its destination. Steganography takes cryptography one step further by hiding an encrypted message so that no one suspects it exists. Ideally, anyone who analyzes your data will not be able to know that it contains encrypted data.
In modern digital steganography, data are first encrypted by the usual means and then inserted, using a special algorithm, into redundant (ie provided but unnecessary) data that is part of a particular file format, such as a JPEG image . Think of all the bits that represent the same color pixels repeated in a row. By applying the encrypted data to these redundant data in a random or non-visible manner, the result will be data that appears to have regular, unencrypted "noise" data patterns. A mark or other identifying symbol hidden in software code is sometimes referred to as a watermark.
Recently revived, this obsolete term earned currency in its day (1500) from a work by Johannes Trithemius, Steganographia, ostensibly a system of angelic magic, but also intended to include a synthesis of how to learn and know things contained within a cryptography system. The book was published in private but never published by the author because those who read it found it quite frightening.