A cocos2d' sprite is like any other computer sprite. It is a 2D image that can be moved, rotated, scaled, animated, etc.
Sprites (implemented using the Sprite class) can have other sprites as children. When a parent is transformed, all its children are transformed as well.
Since sprites are subclass of CocosNode, they can be transformed manually or by using actions. See Actions, Transformations and Effects for more detail about actions.