Actual: An economic system in between capitalism and communism, advocating collective ownership of the means of production and distribution of goods.
That atheist socialist Hussein wants to impose Sharia Law and gay marriage on America!
Socialism is not social democracy (socialism has nothing to do with taxing people or pouring money into welfare programs). Nor is socialism necessarily communism (many socialists believe in the right to personal property and not in the redistribution of income).
To put it briefly: socialism is the idea that those who work to create a profit should receive it. You can make money by working but not by exploiting others.
2. The extension of democratic ideals into the economy.
A political philosophy based on the belief that some or all businesses should be run solely for the benefit of the people using them.
Socialism and Communism are based on similar principles. Socialism does not require that a socialized industry be legally owned by the government, but if that were the case it could still be considered socialism. In the strictest sense, Communism prohibits private ownership of money, business, or goods, while Socialism may or may not on a case by case basis. The two can therefore resemble each other and it can be hard to distinguish one from the other.
In another country's socialized medical system, I am a doctor, own my office, and pay my own salary out of my business account, but legally have no right to decide how to run any aspect of my business. I can't change my prices, deny service to anyone, or increase my own salary.