The marketing funnel is an abstraction of what the journey of a typical customer looks like through the different phases of marketing activity:

• Acquisition: build awareness on your product/service, and acquire user interest
• Engagement: when the user interacts with your business
• Monetization (Conversion) and Retention: when the user becomes a customer and makes a purchase

There can be more phases depending on the source. It is called a funnel because through these various stages the number of customers that will make it from one stage to the other reduces at each step - losing customers because of competition, bad targeting or low brand recognition, etc.

\       Acquisition       /
 \-----------------------/
  \     Engagement      /
   \-------------------/
    \  Monetization   /
     \ and Retention /

With analytics, you can see which channels perform better at each stage, and optimize your marketing activity accordingly.