What is Wrapped Ether (wETH)?

Wrapped ether (wETH, also stylized "WETH") is an ERC-20 representation of ether (ETH), which allows it to be directly traded with other ERC-20 tokens, something not possible with unwrapped ETH. To create wETH, you send ETH to a smart contract, which locks up the ETH and returns wETH. This wETH can be changed back to ETH again by sending the wETH back to the smart contract.