What is an ERC20 Token?

If you’re reading this page, you’ve probably heard the term ERC20 Token thrown around, especially in the wake of the recent boom in ICO funded blockchain start-ups.

ERC stands for Ethereum Request for Comments. This is an official protocol for proposing improvements to the Ethereum network. '20’ is the unique proposal ID number.

ERC20 defines a set of rules which need to be met in order for a token to be accepted and called as 'ERC20 Token'. The standard rules apply to all ERC20 Tokens since these rules are required to interact with each other on the Ethereum network. These tokens are blockchain assets that have value and can be sent and received, like Bitcoin, Litecoin, Ethereum, or any other cryptocurrency.
The difference between these tokens and a standalone currency like Litecoin is that ERC20 tokens piggyback on the Ethereum network, hosted by Ethereum addresses and sent by Ethereum transactions. Take this transaction for example https://etherscan.io/tx/0x2e81009efe3c00f4869ac4a39fa9b106d5b9fb14d73e98a70d7c5f6f96f4d807
At first glance, this transaction may look like an empty Ether transaction - Note the ‘Value’ of Ether transacted is zero - but look at the text in the red box:

That is a record of the amount of OmiseGo tokens that were sent (2.77 OMG) and the Ethereum network addresses involved. The address directly above the red box "Contract 0x....." is the OmiseGo Smart Contract - an application that handles the distribution and transfers of OMG tokens on the Ethereum network.  This is why, to execute a 'token transfer' transaction, you must pay a fee in Ethereum to the network.
See here for more details on how ERC20 token fees work, see this article http://support.exodus.io/article/67-how-do-i-send-or-exchange-an-ethereum-powered-asset

Sometimes, token contracts do not handle token transfers correctly, sometimes because the fee was too low, or the contract was incorrectly programmed. In these cases, examining your transaction on a blockchain explorer like Etherscan will show an error:

By now, you may have noticed that within your Exodus wallet, your ANT, GNT, REP, EOS, and other ERC20 assets share the same receiving address as your Ethereum address. Now you know why!

All ERC20 tokens transact on the same network that your Ethereum wallet uses. Hence, an ETH address is also a GNT address, is also an EOS address, and so forth.