Definition - An audience is a group of individuals or users that you (or your business) are targeting to further your relationship with them based on mutual interest(s) in your products, services or knowledge
Marketing - Having a defined audience allows your business to better allocate resources (time & money) geared towards deepening relationships with those individuals or businesses
Optimization
Looking internally at your current customer base and finding the similarities among them. The defining characteristics could be geography, demography, circumstance. Where is there overlap and what marketing tools can you deploy against your marketing efforts to maximize that return?
Website analytics like Google Analytics and customer surveys (depending on your business) are two examples of ways to get data on the makeup of your audience.