Salaam 'alaikum :D
Allah[God] said in the glorious Qur'an:
لَن تَنَالُوا الْبِرَّ حَتَّىٰ تُنفِقُوا مِمَّا تُحِبُّونَ ۚ وَمَا تُنفِقُوا مِن شَيْءٍ فَإِنَّ اللَّهَ بِهِ عَلِيمٌ
"Never will you attain righteousness unless you spend (in Allah's Cause) from that which you love. And whatever you spend - indeed, Allah is Knowing of it."
[Translation of 3:92]
WHAT IS MEANT BY CHARITY IN ISLAM?
Charity, for which the expression used in the Holy Quran is "spending out of what God has given you", means using your energy, talent, resources, money, possessions, or whatever else, to help and do good to those in need. In Islam charity is very often mentioned alongside prayer because just as the latter is man's relation with God, or man's duty towards God, the former (charity) represents his relation with his fellow-beings, and indeed with all the creation of God. Prayer expresses love for God, submission to Him, and a desire to bring out the Divine qualities that lie hidden in every person. Charity is an expression of sympathy and benevolence towards God's creation, putting into actual practice the lessons you learn in prayer.
SOME EXAMPLES OF WHAT ARE ACTS OF CHARITY IN ISLAM.
Innumerable examples can be given because doing any kind of good to anyone, even to yourself to make you more capable of benefitting others, by using what God has given you, is an act of charity. Feeding the hungry, helping the poor, taking care of the destitute such as orphans, lending a hand to the disabled, helping an unemployed person to find a job, etc., are the more obvious examples of charity taught by Islam. But it also teaches that there are other, smaller acts of charity which one has the opportunity to do everyday. Helping someone in any way, showing the way to a stranger, speaking a kind word to cheer someone up, giving useful advice or imparting knowledge to someone, removing from the road something that could cause an accident, even simply refraining from hurting anyone, are all acts of charity in Islam.
Being charitable is very strongly urged upon the Muslims. There is no person at all who cannot do a deed of charity to others. The prophet Mohammed -peace be upon him- said: "Every Muslim has to give in charity." The people then asked: "But what if someone has nothing to give, what should he do?" The Prophet replied: "He should work with his hands and benefit himself and also give in charity (from what he earns)." The people further asked: "If he cannot find even that?" He replied: "He should help the needy who appeal for help." Then the people asked: "If he cannot do (even) that?" The Prophet said finally: "Then he should perform good deeds and keep away from evil deeds, and that will be regarded as charitable deeds."
TO WHOM CAN A MUSLIM GIVE IN CHARITY?
Just as acts of charity have the broadest possible significance in Islam, similarly the circle of those towards whom charity is to be exercised is the broadest that can be conceived. Starting with the people around us - our relations, friends, and neighbors - it extends to all Muslims, and to followers of other religions. In fact, a Muslim's charity covers even animals. The Holy Quran emphasizes that one should keep a special look-out for those who may be in need but who do not ask for help:
لِلْفُقَرَاءِ الَّذِينَ أُحْصِرُوا فِي سَبِيلِ اللَّهِ لَا يَسْتَطِيعُونَ ضَرْبًا فِي الْأَرْضِ يَحْسَبُهُمُ الْجَاهِلُ أَغْنِيَاءَ مِنَ التَّعَفُّفِ تَعْرِفُهُم بِسِيمَاهُمْ لَا يَسْأَلُونَ النَّاسَ إِلْحَافًا ۗ وَمَا تُنفِقُوا مِنْ خَيْرٍ فَإِنَّ اللَّهَ بِهِ عَلِيمٌ
"[Charity is] for the poor who in Allah's Cause are restricted (from travel), and cannot move about in the land (for trade or work). The one who knows them not thinks them to be rich on account of (their) abstaining (from begging), but you will know them by their [characteristic] sign. they do not beg of people at all. And whatever you spend in good - indeed, Allah is Knowing of it. "
[translation of 2:273]
WHAT KIND OF THINGS SHOULD BE GIVEN IN CHARITY?
In case of those acts of charity when we give something away, the Holy Quran teaches that we should only give good and useful things, not useless and worthless ones, and they should be the kind of things we like to have ourselves. Moreover, things given in charity must have been earned or acquired lawfully by the person giving them away.
يَا أَيُّهَا الَّذِينَ آمَنُوا أَنفِقُوا مِن طَيِّبَاتِ مَا كَسَبْتُمْ وَمِمَّا أَخْرَجْنَا لَكُم مِّنَ الْأَرْضِ ۖ وَلَا تَيَمَّمُوا الْخَبِيثَ مِنْهُ تُنفِقُونَ وَلَسْتُم بِآخِذِيهِ إِلَّا أَن تُغْمِضُوا فِيهِ ۚ وَاعْلَمُوا أَنَّ اللَّهَ غَنِيٌّ حَمِيدٌ
"O you who believe! Spend of the good things which you have (legally) earned, and of that which We have produced from the earth for you, and do not aim at that which is bad to spend from it, (though) you would not accept it save if you close your eyes and tolerate therein. And know that Allah is Rich (Free of all wants), and Worthy of all praise. "
[translation of 2:267]