A template is an outline that contains an HTML wrapper.
The name of the template maps to a node type. So if you have a headline with type greenroom, Fargo will look for a template with that name. If it finds it, it replaces the contents of the special <%bodytext%> macro with the text below the headline.
Your templates are in a top-level outline called #templates. Its sub-heads are names of templates, and underneath each name is the template definition, which is an HTML wrapper.
Fargo has built-in templates for the following types: outline, markdown, presentation, html. You can override any built-in template by providing your own.
Here's a screen shot of the default templates.
Templates can contain macros, and can reference glossary elements.