1. A secured communication path between two peers, using encryption protocols (a VPN).
2. A non-secured communication path between two peers carrying data over a the base network (may carry data in a different network protocol than the base network)
The computing world has become dependent on various types of tunneling. All remote access VPN connections use tunnels, and you'll frequently hear the people talking about SSH tunnels.
A tunnel is a mechanism used to ship a foreign protocol across a network that normally wouldn't support it. Tunneling protocols allow you to use, for example, IP to send another protocol in the "data" portion of the IP datagram. Most tunneling protocols operate at layer 4, which means they are implemented as a protocol that replaces something like TCP or UDP.
VPN tunnels allow remote clients to tunnel into our network. This supports the previous notion of tunnels being used for "unsupported protocols," even though that may not be apparent. If we VPN into work to gain access to printers or file sharing, it's probably because ports 139 and 445 (the Windows mating ports) are blocked from the outside. They are, in effect, unsupported TCP ports across our border routers. But if we allowed IPSEC or PPTP across the border, to known VPN servers, then everything "just works."
Your packets destined for the Active Directory server's port 445 will be hidden with the VPN packets. When they reach the VPN server, it will demux (de-multiplex, AKA disassemble) the packet and then forward it onto the internal network. When it hits the internal network, the packet's source address is now the VPN server's internal IP, so that responses can go back to the VPN server. Other than that, the packet is exactly as you intended it at this point. Upon receiving a response, the VPN server will encapsulate that packet by adding the VPN headers, and then ship it back to you out its external interface.
A few interesting things to note about the VPN tunnel are: once your data hits the internal network it's already been unencrypted, and when your data is traversing the Internet there is extra "stuff" attached to the packet.
Unmentioned, but probably obvious, is that VPN protocols will also encrypt your data before transmission. It doesn't matter for understanding tunneling, but it's worth mentioning. Take notice that the encryption is not end-to-end, i.e. you and the server's communication are not truly secure. Surely it's secure from prying eyes between yourself and your work, but as soon as packets are shipped beyond the VPN server, they're once again unencrypted.
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