A funnel is a chart that visualizes a linear process that usually consists of several sequential steps.

The funnel consists of a top part, called the Head (or base), a bottom part, called the Neck, and in-between it, it has progressively decreasing values, in proportions amounting to 100 percent in total (the Head). Every step's size is determined by the series value as a percentage of the total of all values. It's also helpful to display, next to every step, the portion of the step itself as compared to the previous step (for example: step 3 is 20% of total, but 90% of step 2).

Although this chart is called a funnel, it differs from a physical funnel, because not everything that comes in (first step) comes out (last step). It is only called a funnel because of its shape. 

The funnel chart is mostly used to visualize sales processes and reveal potentially problematic steps (areas that have the highest drop rate compared to the previous step).

In the following chart, I've chosen to draw a "Running Funnel", which shows the drop rates between several steps that people overcome before they actually go running: