in japanese it literally means "spirit", "apparition" or "demon"
inuyasha's brother Sesshoumaru is a youkai
Youkai (written with kanji meaning "bewitching apparition") are traditional Japanese monsters of supernatural origin. The word is often translated as "goblin" or "demon". Youkai are grotesque, diverse, and often as silly as they are terrifying. They were a popular subject in ukiyo-e prints, and the artist Toriyama Sekien is famous for publishing an extensive, illustrated bestiary of the creatures. Some of the best known youkai include oni (large, horned ogre-like demons who punish sinners in hell), tengu (beaked or long-nosed bird-men), kappa (turtle-like water-imps), and kitsune and tanuki (foxes and raccoon-dogs - real animals to whom supernatural powers were attributed).
The nurarihyon is a very obscure breed of youkai.