The term interlude is most often used in connection with stage production/theater and refers to a short play that is inserted into the larger play. Sometimes the interlude can be connected to the larger play in some form, but more often than not it is simply a break in the performance. For instance, before movies were digitized they were shown from large film reels and the reel would have to be switched half way through the movie. While that was happening moviegoers would watch a short cartoon during this interlude. In the theater, depending on the play and the stage, there may be a short interlude between acts while the stage is prepared for the next act. The interlude can sometimes also take the form of a musical performance.
The term literally means "between play" from the Latin inter= between and ludus= play
There is another use of the term though. It is sometimes used to refer to medieval English morality plays . These plays were staged to educate audiences regarding the adherence to desirable virtues and actors would portray collective ideas like mankind, the devil, etc. The point was always that being virtuous and moral is the right way to act and pays off. For more on this see the link below.