The simplest explanation for the question is this: Heavy Oil is any type of unrefined crude oil which is just too thick (viscous) to flow easily. In order to make the heavy oil flow, a type of thinner or 'diluent' is used to reduce the viscosity (thickness) and allow the now diluted oil to flow through a pipeline to an oil refinery.
Heavy oil deposits are found in over 30 countries around the world with the largest deposit being found near Orinoco, Venezuela. Canada also has large deposits in North Eastern Alberta around the booming small city of Fort McMurray. The exploitation of this key energy supply called variously Energy Sands, Oil Sands, or Tar Sands has generated a lot of controversy and protestations throughout the world.
Traditionally, heavy oil production consisted of strip mining where the sands containing an oil bearing substance named 'Bitumen' were dug up in vast swaths denuding the land and were then injected with hot water or steam to separate the heavy crude oil from the sand byproduct. Environmental groups have long derided this practice as being wasteful and destructive as the land itself was first dug up, then natural gas was used to heat the water. Critics complained that this method of oil recovery was too resource intensive, and indeed it is an expensive process. Experts say that in order to be profitable the Energy Sands need an oil price per barrel of about $80 US dollars.
Recently, newly developed technology is enabling the reduction of both water and natural gas use which goes a long way towards answering some of the oil industry's critics. Some critics however take an ideological stance about the destructiveness of the oil and gas industry and are not satisfied. Nevertheless new technologies like 'Solvent Extraction' which eliminates the use of water,steam and heat from the extraction process, and 'ElectroThermal' technology which gradually warms the bitumen while 'in situ'(in the ground) thereby easing the oil extraction and reducing greenhouse gas emissions. To be fair, these are small companies that are coming up with new ways of extracting heavy oil and account for a small fraction of the roughly one million barrels per day of heavy crude oil produced in the Energy Sands region. The larger companies to date have not been nearly as aggressive in adopting new technology.
Today heavy oil is an important natural resource which accounts for nearly one quarter of North Americas fuel supply. As a safe and secure oil reserve the future of this industry will remain strong although the larger oil companies are likely to continue to face criticism and protestations for their seeming indifference to public concerns.