Whats a Smart Contract?

When I asked the question at a recent talk I got the answer that smart contracts are the embedded agreements that exist in all Blockchains.   But they can refer to other unrelated external agreements as well.  But how often is that latter approach  used?

See also:  https://www.ethereum.org/   

Whats a Smart Contract? 

With the advent of the Ethereum blockchain everyone started to talk about “smart contracts” as an absolutely new approach to regulating relations among people. Today we will discuss what a smart contract is in simple words.

Smart contracts are a form of automated agreements that use electronic algorithms or conditions to facilitate the execution of various transactions. Their goal is to increase the transparency of transactions with a reduction in fees and eliminate potential conflicts in case one of the parties to a contract fails to fulfill its obligations.

A smart contract helps to avoid risks when making deals and prevent prolonged judicial process in case of default, to reduce costs by eliminating intermediaries and to ensure the bilateral trust. .... "