Chakra is simply stated, the energy you use when doing a jutsu. Basically, to do ninjutsu or genjutsu, you must mix your Chakra(which is bodily energy collected from cells throughout the body) and spirtiual energy(which is gained through experiences). Then by doing the proper hand poses Seals, the jutsu can be activated. Once Chakra is activated, various techs and movements can be used. Without Chakra a Ninja wouldn't be able to do much.

The creator of the Naruto series, "Masashi Kishimoto", used the Chakra system as a power that the Ninjas in the series can use, He quotes:

"I needed a hook to tie in those points in the story when characters would use powers that were beyond normal human capabilities. The term is Chakra, which is used as an explanation for readers to better understand the powers. It’s similar to “the Force” in Star Wars, or chi (aka. - Ki) in "Dragon Ball", or magic points in RPGs." In other words, a character's Chakra capacity represents his or her mana, or mental power. This has almost nothing to do with one's physical strength, or in other terms, body stamina.