Open Access (OA) literature is digital, online, free of charge, and free of most copyright and licensing restrictions. What makes it possible is the internet and the consent of the author or copyright-holder (Peter Suber). OA is achieved through two primary channels: archiving (Green OA) or publishing (Gold OA). OA is completely compatible with peer review.
OA archiving is the intentional act by content producers to make copies of their works available in a freely-accessible digital archive or repository. Repositories may be affiliated with funding agencies (PubMed Central) or institutions (eScholarship), or may be subject-specific (arXiv). Although archiving of the final published version is the ideal, most archived works are either preprints or postprints. Preprints are versions of works as submitted for review, and includes only the original work of the author(s). Postprints, or the author's final version, are versions that incorporate all changes from the peer review process, but have not yet been copyedited and formatted for publication (i.e., no page, volume or issue numbers, etc.).
OA publishing shifts the costs of content creation and distribution away from subscribers. What this means is that OA published information is freely available to anyone worldwide with an internet connection - no subscription necessary. Instead of relying on subscriptions to subsidize publishing costs, those costs are covered by sponsorships or author-side fees, which may be covered by institutions or grant-funding organizations. Fewer than half of all OA journals charge author-side fees, and many of those that do will waive such fees for authors with economic hardship.
Adapted from Wake Forest University Z. Smith Reynolds Library's Open Access guide, created by Molly Keener.