Principal is the actual money you have borrowed and interest is the fee lenders charge you whilst you owe this money. Interest is generally calculated daily on the loan balance and charged monthly in arrears; so loan repayments contain a repayment of the principal and an interest element. The amount going toward the principal in each payment varies throughout the term of the mortgage. In the early years the repayments are mostly interest. Towards the end of the mortgage, payments are mostly for principal. In this way, the payment amount determined at the outset is calculated to ensure the loan is repaid at a specified date in the future (e.g. in 30 years).
