Software is the stuff that is run on hardware. It usually refers to data/programs that are installed on a computer. It is "soft" because it is simply electronic information that can be distributed over the Internet, instead of hardware, which is "hard," because it physically exists as wires, chips and so forth, and can be ordered over the Internet but needs to be delivered in the real world.
Software and Hardware are both needed to run a computer system. Without hardware, there is nowhere to put software and without software, the hardware can't do anything because it does not know what to do, after all software is lists of instructions. Microsoft wants to make software its own despite the fact that everyone has it by patenting the different components of it.