When I starting blogging, I was totally confused with Gadgets and Widgets. I was wondering what is the difference between gadgets and widgets? I started "Google-ing" it to find out the truth. Several sites that I visited were using the word "widgets" and some other sites used "gadgets". Making my confusion worse.
Finally, I found the best answer for my question and here it is.
A widget is a piece of reusable code that you can plug into virtually any website. A gadget acts just like a widget, often fulfilling the same purpose, but it is proprietary. It only works on a certain website or a specific set of websites.
For example, Google Gadgets can look and act like widgets. But they only work on Google pages.
A widget, on the other hand, works on any page that lets you add an HTML block. You can put them on your blog, or your personalized start page, or your personal website.-Source
You can see my sidebar contains Recent Posts, Recent Comments, Followers and Tags Cloud. Those are examples of widgets we are talking about. I am using code from FeedBurner for the recent posts, and recent comments widgets.
So, here comes my definition for "widgets". Widgets are third party elements or codes that are reusable, easily-organizable and make a page more interesting.
Update: Google gadgets can work not only in Google pages but everywhere. Read about it here!