The term permaculture was developed by Austrailians Bill Mollison and David Holmgren in the 1970s as a result of their work in sustainable living. It is derived from combining the words Permanent and Culture, although Agriculture is also a central theme.
One could think of permaculture as a system of design with specific techniques and terminology, but it is also evolving into a philosophy with a defined set of ethics.
To paraphrase Geoff Lawton;
There are two common approaches to the predicament of growing food. The current industrial system of agriculture offers petroleum and natural gas as the way to provide nourishment. The conventional organic growers use similar systems, but replace the functions of chemicals with human labor. Permaculture is about using intelligent design to connect the functions of elements within a growing system and eliminate the need for many of those "solutions" such as fertilization, weeding, and pest control.
"Permaculture uses a set of principals and practices to design sustainable human settlements"
-Toby Hemenway in Gaia's Garden
Here is a great explanation from John Kitsteiner on his TC permaculture site.
This Article from Toby Hemenway really provides some in depth understanding of the concept.