"ICO" refers to "Initial Coin Offering", or the initial offering of coins (tokens). This is a form of crowdfunding that uses cryptocurrency.
During an ICO, a project team sells digital tokens to investors in exchange for cryptocurrency. Like in the case of other crowdfunding models, during an ICO participants fund the development of a company in order to then profit from that company in the future. Investors can also profit from reselling tokens for a higher price than the price at which they bough them.