An “entity” is a core thing that is being modeled. In Magento, a product might be an entity, but the product’s SKU is not an entity, it is too simple. It’s like the difference between objects and object properties. Objects == Entities, and Object Properties == Attributes.
Entities extend Resources and resources are simply connections to the database (actually they manage the different read/write connections and automatically figure out table names based on convention().
So, basically, Entities are “core” things that pair up to some Models and help them save to the database.