Software as Service is a category of cloud computing in which Software is centrally hosted and it is licensed on a subscription basis. It is also known as On-demand software. Generally, clients access the software by using a thin-client like a web browser.
Many applications like Google docs, Microsoft office etc. provide SaaS model for their software.
The benefit of SaaS is that a client can add more users on the fly based on its current needs. And client does not need to install or maintain any software on its premises to use this software.