A Service Pack ( generally abbreviated as SP) is a collection of Fixes, Updates and Enhancements to a Software Product. Normally Service Packs fix many bugs in applications.
Generally small updates come as Patches. But as the number of patches reach a certain limit, all the patches are released as a bunch called as Service Pack.
Many times updating a software product through a Service Pack is much easier than using many patches.
Service Packs are termed as SP1, SP2, SP3 and so on.
Example: Microsoft sends Service Packs very regularly for all their Products like Windows Operating Systems like XP, Vista, Windows 7, Microsoft Visual Studio versions, Microsoft SQL Server Versions, Microsoft Office Versions etc etc.