A retrovirus is a virus that can cause the transcription of its genes back into the host genome. An endogenous retrovirus is one that has co-existed with the host over evolutionary time. Therefore it is (almost invariably) benign, and is likely to evolve in step with the host.
Some (perhaps 1%) of the non-coding DNA in genomes, which in mammals is about 95% of the total DNA, is believed to be endogenous retroviruses from long ago, which no longer have active phenotypic effects, but which still code for their own replication.
Although integrated into the host DNA they can be recognized by their resemblance to freely-transmitted retroviruses. They have the genes gag, which encodes the viral structure; pol which codes for synthesizing molecules such as reverse transcriptase; and env, the gene for the envelope that allows active retroviral particles to move through cell membranes.
A recent study suggested that inactive retroviruses might be activated again: patients with schizophrenia showed levels of active endogenous retrovirus in their blood stream not found in a control group. (Proceedings of the National Academy of Sciences, vol. 98, quoted in New Scientist no. 2286.)
Endogenous retroviruses are expressed in high quantities in the trophectoderm, an early layer of the placenta. It has been suggested that they are activated and infect nearby maternal cells to prevent them rejecting the embryo's genome. This might have been a significant advance in the evolution of the placental mammals, were mother and child genomes are in close contact.
(See http://darwin.bio.uci.edu/~faculty/villarreal/new1/host-virus.html for this theory.)