"A demo is a program that displays a sound, music, and light show, usually in 3D. Demos are very fun to watch, because they seemingly do things that aren't possible on the machine they were programmed on."
At some point somebody found programming intros more interesting than cracking games, and demo scene started to separate from the cracker scene. Instead of demonstrating their skills of cracking programmers started to demonstrate their skills of coding. Intros were released with no game to distribute with them, and several intro screens were collected together to form demos. First these were megademos, where individual intro screens were combined together with a menu or a loader program, but then the trend in demos became a continuous flow of effects. Copyparties started to have demo competitions, graphics competitions, music competitions etc., and the name "copyparty" was slowly changed to "demoparty", as little was left from the original idea of swapping games.
As demos were more than just short introductions of who cracked what, more work was needed. As one person didn't usually have enough time and talent to take care of all aspects of making a demo, demo groups were formed. Typical roles in a group were - and mostly still are - coder, graphician, musician, swapper, sysop, organizer. There were usually several of each, and of course roles were combined if one person had talent in several aspects. Roles that have mostly lost their meaning today are swapper and sysop.
In "the old days" when there was no Internet generally available, the communication was usually made through mail networks. Swapper took care of this. Typically a swapper had tens or hundreds of contacts around the world, and new demos were sent over to each other. The swapper network originated all the way from the cracker scene. Usually swappers just swapped diskettes, so that the costs of two as active swappers stayed in balance, but for novice swappers who didn't have as much stuff to copy to others, more experienced swappers required blank disks or even money for their services.
The role of the sysop was to take care of the groups bulleting board system (BBS). These were server computers with modem connections, and all who were granted access to a BBS could connect the system with their modem, leave messages to others and upload and download files. If the BBS had several modem connections, people who were online at the same time could chat. BBS's were also connected together to form networks, the servers called each other during night time and exchanged files and information.
In the early days the main platforms for demos were Commodore 64, Amiga and Atari ST. As the main audience for those computers were game players, machines had good audiovisual cababilities - better than typical office computers of that time. In the beginning of 90's PC computers started to have good enough display adapters and sound cards, and slowly the demo scene shifted more and more on PC computers. For some reason - probably because the price has never been "hacker friendly" - the demo scene on Macintosh computers is almost nonexistant. The demo scene on old platforms has almost died, except, surprisingly, on Commodore 64. One thing that keeps C64 demos alive is the availability of emulators for other platforms. But also other platforms for demos exist: game consoles, such as Playstation, Java, Flash etc. There are even demos for digital cameras...
In demo parties there's usually a wealth of competitions nowadays. Typical competitions are demo, 4k intro, 64k intro, pixeled graphics, raytrace graphics, animation, tracker music and mp3 music compos. In 4k and 64k intros the production has a size limit of 4k or 64 k - the idea is in the skill to crunch as much stuff into as small space as possible. Pixeled graphics compo means "hand drawn" graphics, either with a mouse or a tablet. Scanning, digital photography or rendering is not allowed in the images. In raytrace graphics the images are produced using 3d-packages. In tracker music the music is composed using "trackers", sequencer-like music programs that originally appeared on Amiga in the beginning of 90's and have been popular in the demo scene ever since. Originally trackers used only samples for producing music, but modern trackers such as buzz (http://www.buzztrack.com/) are more like synthetizers. Mp3 music can be made with any means of creating music, but it should be in mp3 format. In the parties there are usually different categories of intro- and demo compos for different machines.