Prokaryotes are simply organisms that lack any membrane bound organelles in their cellular structure. They are contrasted to eukaryotes, which feature a true nucleus and membrane bound organelles. It is split into two primary domains: bacteria and archaea. They are almost entirely single cellular, though a small group of prokaryotes show multicellular-like stages.
The primary difference between prokaryotes and eukaryotes involves the role of membranes throughout the cell. Eukaryotes feature a true nucleus, with a lipid bilayer separating the genetic material from the rest of the cell (this membrane is known as the nuclear envelope). Prokaryotes, on the other hand, have a simple nucleolus, or nucleoid, where the genetic material is gathered and sequestered without the use of membranes. It isn't a true separation, as the genetic material is still exposed to molecules in the cytoplasm of the cell.
Prokaryotes also do not have any other membrane bound organelles, such as chloroplasts or mitochondria. The processes that are normally reserved for these organelles are done along the outer membrane. These processes include oxidative phosphorylation and photosynthesis, depending on the specific organism.
Other than these differences, the rest of the prokaryotic cell is similar to the eukaryotic cell. They feature a cytoskeleton for structure and many of the same functional molecules (ribosomes, for instance). Because of the lack of membrane bound organelles and the inability to sequester reactions from the cytosol, prokaryotic cells tend to be far smaller than eukaryotic cell.
Prokaryotes are divided into two large domains: bacteria and archaea. Archaea were generally considered to thrive only in very harsh conditions, including high temperatures and extreme pH. However, they have been discovered in all habitats and so this belief has been proven wrong. Because of the differences between bacteria and archaea, many believe that the term "prokaryote" should be disbanded and instead two new classifications, Bacteria and Archaebacteria.
Most prokaryotes are strictly unicellular, though they do show community behavior. For instance, bacteria tend to clump together in aqueous environments to form "biofilms", better known as "pond scum". These biofilms may begin to have external structure and a system that begins to resemble a higher order organism. Some of the cells within the cluster may "differentiate", showing a more specific role that allows the cluster as a whole to function more efficiently.
These organisms reproduce through binary fission or budding, known as asexual reproduction. Genetic diversity occurs through mutation and bacterial conjugation, where bacteria cells bind to one another and exchange genetic material. It is not a replicative process, like the mitotic and meiotic cycles of eukaryotic cells.