Automations are workflows that run in the cloud, i.e. behind the scenes. Examples include:
Compress images
Convert URLs to attachments
Generate webpages from HTML
Generate PDFs, etc.
You can find the full list here.
Automations vs Extensions
Extensions are our user-facing products, i.e. things that end users would interact with directly:
Forms
Shared Views
Portals
Essentially, everything that is not a Form, Shared View or Portal is considered an automation.