Simulation has been used for a long time in engineering and physics, and is increasingly used in chemistry, biology, economics, finance, and healthcare, among other fields.
Simulation is the imitation of the behavior of some process, system, or entity from a real-life domain. This imitation is carried out based on a model, which is typically built and then run on one or more computers. This is why the field is actually called modeling and simulation, and is often referred to as M&S.
Interestingly, a simulation can be built of something that does not yet exist, as a means of testing new ideas.