VAT, or Value Added Tax, is a consumption based tax assessed on the value added to goods and services. It applies more or less to all goods and services that are bought. It is a tax ultimately borne by the final customer.
It is charged as a percentage of the price, and is therefore visible.
The purpose of VAT is to generate tax revenue for the government. The tax, whilst paid by the buyer through the purchase price, is collected and paid over to the government by the seller, and is therefore known as an indirect tax.