magnetic domain
A magnetic domain is a small region inside a ferromagnetic material, like iron, in which all the atomic magnets point the same way. Think of a nation made of many provinces: within each province everyone faces one direction, but different provinces face differently. These provinces are the domains, and they are the key to understanding why iron can be either an ordinary lump of metal or a strong magnet. It answers, if every iron atom is a tiny magnet, why isn't every piece of iron already magnetic?
Inside a ferromagnet the exchange interaction forces neighbouring atomic moments to align, but only locally, so the material breaks up into many domains, each uniformly magnetised but pointing in its own direction. In an unmagnetised piece these domains are oriented at random, so their fields cancel and the whole object shows no external magnetism. When you apply an external field, two things happen: domains already pointing near the field direction grow at the expense of their neighbours (their boundaries, called domain walls, shift), and domains gradually rotate to line up. As more of the material points one way, the object becomes magnetised.
Domains explain the whole story of ferromagnets. They explain why iron is normally unmagnetised yet can be magnetised; why there is a maximum, saturation, once every domain is aligned; why a magnet can be demagnetised by heating or hammering, which jumbles the domains again; and why magnetising and demagnetising are not perfectly reversible, a lag called hysteresis that is central to magnetic recording and transformer design.
Drop a strong magnet and its strength fades a little: the jolt knocks some domains out of alignment. Repeatedly hammering or heating an iron magnet scrambles the domains fully and demagnetises it.
Aligned domains make a magnet; scrambled domains make plain iron.
Domains exist only in materials with strong atom-to-atom coupling, that is, ferromagnets (and their kin). Paramagnetic and diamagnetic materials have no domains, which is why they cannot be permanently magnetised.