ERC stands for Ethereum Request for Comments. This is an official protocol for proposing improvements to the Ethereum network. '20’ is the unique proposal ID number.
ERC20 defines a set of rules which need to be met in order for a token to be accepted and called an 'ERC20 Token'. The standard rules apply to all ERC20 Tokens since these rules are required to interact with each other on the Ethereum network. These tokens are blockchain assets that can have value and can be sent and received, like Bitcoin, Litecoin, Ethereum, or any other cryptocurrency.
The difference between these tokens and a standalone currency like Litecoin is that ERC20 tokens piggyback on the Ethereum network, hosted by Ethereum addresses and sent using Ethereum transactions. Take this transaction for example: https://etherscan.io/tx/0x2e81009efe3c00f4869ac4a39fa9b106d5b9fb14d73e98a70d7c5f6f96f4d807
At first glance, this transaction may look like an empty Ether transaction - Note the ‘Value’ of Ether transacted is zero - but look at the text in the red box:
See here for more details on how ERC20 token fees work, see this article http://support.exodus.io/article/67-how-do-i-send-or-exchange-an-ethereum-powered-asset
Sometimes, token contracts do not handle token transfers correctly, sometimes because the fee was too low, or the contract was incorrectly programmed. In these cases, examining your transaction on a blockchain explorer like Etherscan will show an error:
By now, you may have noticed that within your ETH or MEW wallet, tokens such as ANT, GNT, REP, EOS, and other ERC20 assets share the same receiving address as your Ethereum address. Now you know why! All ERC20 tokens transact on the same network that your Ethereum wallet uses. Hence, an ETH address is also a GNT address, is also an EOS address, and so forth. This is similar to how Komodo assetchains share the same address with the difference that Komodo chains are native blockchains.