The best way to define social media is to break it down. Media is an instrument on communication, like a newspaper or a radio, so social media would be a social instrument of communication.
Examples of Social Media websites:
Social Bookmarking. (Blinklist, Simpy) Interact by tagging websites and searching through websites bookmarked by other people.
Social News. (CNN, Propeller, Reddit) Interact by voting for articles and commenting on them.
Social Networking. (LinkedIn, Facebook) Interact by adding friends, commenting on profiles, joining groups and having discussions.
Social Photo and Video Sharing. (YouTube, Flickr) Interact by sharing photos or videos and commenting on user submissions.
Wikis. (Wikipedia, Wikia) Interact by adding articles and editing existing articles.