Compound interest
Interest earned on both the original principal and the interest already added.
Compound interest is interest calculated on the initial principal AND on the accumulated interest from previous periods. Unlike simple interest (which grows linearly on the principal only), compounding makes a balance grow at an accelerating rate, because each period's interest itself earns interest. The more frequently interest compounds (daily vs. yearly) and the longer the time horizon, the larger the effect.
Example: $1,000 at 5% compounded monthly for 10 years grows to about $1,647 — roughly $647 of it is compounded interest.