At its simplest, a decentralized autonomous organization (DAO) is a community with a shared bank account. Members of the DAO make decisions in a transparent and decentralized fashion, with smart contracts executing these decisions.
For instance, a member can create a proposal suggesting an investment of the treasury or a program upgrade. The DAO members then come together to vote on the proposal. If a predefined quorum votes for the proposal to pass, the proposal is accepted and and executed by a smart contract.
As a result, the DAO structure provides a “flat” organizational structure. Each DAO member has a voice in the community and the opportunity to drive the direction of the organization.