Short answers, pulled from the story.
A game demo is a trial version of a video game, limited either to a certain time period or a point in progress. Unlike the full game, a demo typically restricts gameplay to a few levels or a short time window, and sometimes disables advanced features.
Apogee Software (now 3D Realms), Epic MegaGames (now Epic Games), and id Software were among the companies that relied on shareware distribution in the early 1990s. These then-fledgling studios used the model to let players try the first episode of a game before purchasing the rest.
Shareware can be upgraded to the full game by adding the remaining episodes, leaving the existing files intact. A demo is a self-contained program that cannot be upgraded to the full version. The Descent shareware allowed players to retain saved games when upgrading, while the Descent II demo did not.
Before the Internet, game demos were distributed on floppy disks sold cheaply in store racks, on CDs or DVDs bundled with gaming magazines, and on cover tapes or disks especially common in the United Kingdom and mainland Europe. Console manufacturers also packaged demo discs with new hardware.
A non-playable demo, also called a rolling demo, is a recording of gameplay shown either as captured video or rendered through the game's own engine. These were commonly displayed at gaming conventions such as E3 to preview games still in early production. Many games also play a rolling demo automatically when the title screen is left idle.
Cartridge-based systems typically did not have demos available due to the high cost of duplicating cartridges. Systems that used cheaper media, such as tapes, floppy disks, CD-ROM, and DVD-ROM, were far better suited to distributing demo versions.