I believe most of the comments here are correct or partly correct. As Manager of Research and Innovation at a public service delivery agency, I have often referred to the OECD Oslo Manual for what I think is a good definition/explanation.
An innovation is the implementaion of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.”
A little wordy maybe, but complete in my opinion. The key point that is sometimes overlooked is that it is the “implementation” of something new and improved… not just the idea. Also, as a minimum requirement, it need not be “new” to the world but can be new to an organization.