A tiny idealized magnet! It is a very good model if you have a small strong magnet interacting with objects that are far away, notably other magnetic dipoles or a constant magnetic field.
The cool thing about this model is that we have simple explicit formulas for the magnetic field it produces, and for how this little magnet is affected by a magnetic field or by another magnetic dipole.
This is the perfect model for electron spin, but it can also be representative of macroscopic systems in the right circumstances.
The intuition for the name is likely that "dipole" means "both poles are on the same spot".
Figure 1.
Different macroscopic magnets can be approximated by a magnetic dipole when shrunk seen from far away
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