Quasars are the remarkably bright cores of active galaxies in the distant universe, they are an extreme form of what astronomers call "active galactic nuclei", or AGN for short.

An active galaxy is one in which the central supermassive black hole is consuming large amounts of matter. The infall of matter into the black hole is so great that all the material can't enter the black hole at the same time and so it forms a queue as a spiraling accretion disk.

The matter — in the form of huge clouds — falls into the disk, with the inner parts of the cloud closer to the black hole orbiting faster than the outer parts (just like planets closer to the sun orbit faster than those farther away). This creates a shear force that twists the clouds, causing them to bump into their neighbors as they move around the black hole at velocities ranging from 10% of the speed of light up to over 80%. This friction from fast-moving gas clouds generates heat, and the disk becomes so hot — millions of degrees — that it shines brightly.

Some of the material in the disk is also funneled away from the black hole in a highly luminous, magnetically collimated jet. The hot accretion disk and the jet combine to make the nucleus of the active galaxy shine so bright that it can be seen far across the universe.

The term quasar was first used in an article by astrophysicist Hong-Yee Chiu in May 1964, in Physics Today, to describe certain astronomically puzzling objects:[16]

So far, the clumsily long name "quasi-stellar radio sources" is used to describe these objects. Because the nature of these objects is entirely unknown, it is hard to prepare a short, appropriate nomenclature for them so that their essential properties are obvious from their name. For convenience, the abbreviated form "quasar" will be used throughout this paper.

Between 1917 and 1922, it became clear from work by Heber Doust Curtis, Ernst Öpik and others that some objects ("nebulae") seen by astronomers were in fact distant galaxies like the Milky Way. But when radio astronomy began in the 1950s, astronomers detected, among the galaxies, a small number of anomalous objects with properties that defied explanation.

The objects emitted large amounts of radiation of many frequencies, but no source could be located optically, or in some cases only a faint and point-like object somewhat like a distant star. The spectral lines of these objects, which identify the chemical elements of which the object is composed, were also extremely strange and defied explanation. Some of them changed their luminosity very rapidly in the optical range and even more rapidly in the X-ray range, suggesting an upper limit on their size, perhaps no larger than the Solar System.[17] This implies an extremely high power density.[18] Considerable discussion took place over what these objects might be. They were described as "quasi-stellar [meaning: star-like] radio sources", or "quasi-stellar objects" (QSOs), a name which reflected their unknown nature, and this became shortened to "quasar".