From Sega Retro

A patch is a file or set of files that is used to modify another file or set of files. It may be distributed as either a standalone program, or a data file which requires a specialised program to apply the patch.

ROM patches

The hacking scene has seen several types of patches, including IPS and RXL, used for ROM hacks. Both these types of patch require programs (for example StealthPatch) to modify the target file. Patches were used during a time when downloading full ROMs would be a lengthy task for slow Internet connections, but with the advent of high-speed Internet connections, patches have fallen into disuse as Sonic-game hackers have made fully modified ROMs available.

ROM patches are still utilized (and often, required) by other communities, due to precautions related to copyright.

Software patches

More complicated games and programs require more complicated patches. Most installed games consist of many files and folders, so something as simple as an IPS patch would be inappropriate. In these cases, standalone programs are used to modify or replace several files automatically. If a game has a fault which was not detected in the beta testing phase, the developer will typically distribute a patch to correct it.