Charcoal is a lightweight black carbon residue produced by strongly heating wood (or other animal and plant materials) so as to drive off all water and other volatile constituents. In the traditional version of this pyrolysis process, called charcoal burning, the heat is supplied by burning part of the starting material itself, with a limited supply of oxygen. Charcoal can also be produced by heating the material in a closed retort.
This process also happens while burning wood, as in a fireplace or wood stove. The visible flame in that case is actually due to combustion of the volatiles given off as the wood turns into charcoal. The soot and smoke commonly given off by wood fire result from incomplete combustion of those volatiles. Charcoal itself burns at a higher temperature than wood, with hardly a visible flame, and gives off practically no smoke, soot, or unburnt volatiles.