Definition
A block template is the complete block candidate that a miner works on. It contains the block header fields and a set of selected transactions from the mempool. In pooled mining with Stratum v1, the pool constructs the template and sends it to miners. In solo mining or Stratum v2, miners can construct their own templates.
Template construction involves selecting transactions (usually by highest fee rate), computing the Merkle root, and setting the appropriate header fields. The ability to construct templates is important for decentralization because it determines which transactions get included in blocks.
In Simple Terms
A candidate block that miners hash. Contains selected transactions and metadata ready for mining.
A candidate block structure provided by a pool (or constructed by a solo miner) containing selected transactions and metadata. The miner hashes this template to find a valid block.