Hearsay evidence is "a statement made out of court introduced to prove the truth of the matter asserted therein." In certain courts hearsay evidence is inadmissible (aka "Hearsay Evidence Rule") unless an exception applies.

IE, to prove Don was in town, the attorney would call a witness and ask, "What did Michael tell you about Don being in town?" Since the witness' answer will rely on second hand information or an out-of-court statement that Michael made, Michael is not available for cross-examination, and it is to prove the truth, it is hearsay. A justification for the objection is that the person who made the statement cannot be subject cross examination. The hearsay rule does not exclude the evidence if it is an operative fact. Language of commercial offer and acceptance is also admissible over a hearsay exception because the statements have independent legal significance.

More on Hearsay
1) Double hearsay is a hearsay statement that contains another hearsay statement itself. For example, a witness wants to testify that "a Trustworthy & reliable person informed me what another person told him." The statements of the trustworthy & reliable person and the other person are both hearsay submissions on the part of the witness, and the second hearsay (the statement of other person) depends on the first (the statement of the trustworthy & reliable man). In a court, both layers of hearsay must be found separately admissible. In this example, the first hearsay also comes from an anonymous source, and the admissibility of an anonymous statement requires additional legal burden of proof. Many jurisdictions that generally disallow hearsay evidence in courts permit the more widespread use of hearsay in non-judicial hearings.