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Monopoly:

A government policy to prevent freedom of competition within some area of the market.

The US Postal Service is an example of a monopoly. The government makes it illegal for everyone else to provide first class mail service. The result of a monopoly is that the company in question is able to raise prices higher than they otherwise would, or provide worse service. Without the ability for others to compete, they don't have immediate pressure from market forces. There is a limit to how inefficient they can get, as people are free to avoid the service in question and spend their money on something entirely different. A monopoly only outlaws direct competition.

Monopolies are often confused with the result of the government policy. That is, people think that a single provider of a service is a monopoly, and mistakenly define it in those terms. The problem with such a definition is that there is a significant difference between a company that successfully dominates a market by providing the best value, and a company that simply makes it illegal to compete. The market winner still has to worry about competition, even if it's merely a potential. If they raise their prices too high, competitors will enter the market because of the lucrative profits. The government-enforced monopoly is immune to the prospect of direct competition.

There is nothing wrong with a dominant company in a market, even if they're the sole provider of a service. A company should be free to pursue their business in any way they choose to. The evil of a monopoly is that they use force to prevent people from doing what's in their best interests. The higher prices and bad service are just a byproduct.