A niche market is a focused targetable portion (subset) of a market.

By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. A niche market may be thought of as a narrowly defined group of potential customers.

A distinct niche market usually evolves when a potential demand for a product or service is not met by any supply, or when a new demand arises due to changes in society, technology, or the general environment.

Niche market ventures may become profitable even though they are by nature small in comparison to the mainstream marketplace, or monopoly. due to the benefits of specialization and focus on small identifiable market segments; even without the benefit of economy of scale. Niche markets may be ignored or discounted by large businesses due to what they consider to be small potential; this in turn is part of the process that makes the niche market available to smaller businesses. The key to capitalizing on a niche market is to find or develop a market niche that has customers who are accessible, that is growing fast enough, and that is not owned by one established vendor already.

Also taken from wikipedia