A packer is a type of software that is commonly used by malware authors and hackers to compress or encrypt an executable in order to obfuscate its code and data. One very common packer is named UPX (http://upx.sourceforge.net) and is available as a package on most Linux distributions. The original purpose of this type of packer was to compress an executable and make it smaller.
Since the code is compressed, it must have a way to decompress itself before executing in memory—this is where things get interesting, and we will discuss how this works in the Stub mechanics and the userland exec section. At any rate, malware authors have realized that compressing their malware-infected files would evade AV detection due to obfuscation. This led malware/antivirus researchers to develop automated unpackers, which are now used in most, if not all, modern AV products.
Nowadays, the term "packed binary" refers not only to compressed binaries but also to encrypted binaries...