From iA wiki
A program distributed in "binary-only" format, meaning the core instructions of the program, or "source code," are not made available. While Closed-Source programs can be reverse engineered, it is much more difficult to alter them than if the software is made open source. Proprietary software is currently the most globalised industry. For example: Microsoft and Windows who dominate their markets around the world.
The term "Closed-Source" only became a popular term with the growing prevolence of Open-Source software, such as Linux. This concept began 1985 Richard Stallman publishes his famous "GNU Manifesto", although Stallman used the term "proprietary software". Before this time, source code was rarely described as open, closed or proprietary.
Fundamentally, Closed-Source software is software that you don't control. It is proprietary software that is legally unavailable to the public either for public review or public use. For users it means they cannot study the source code, or edit it to add, subtract, or otherwise modify to make it work better. For a long time, Closed-Source systems was believed to be the only way to make money developing software until figures like Richard Stallman and companies like IBM and Red Hat began changing this model from a product-based economy to service-based.
Making a product closed-source or proprietary is not the only way to restrict it as many open-source advocates are finding. Instead, source code can be licensed to prevent certain types of use. A license can mean there are legal or other restrictions on the use of Open-Source software that mean you still do not control what the program does. Richard Stallman was aware this would become a restriction when he came up with "GNU" and the idea of free software. Stallman suggested many years ago that software should be free as in "freedom" not free as in its users don't pay money for it. Developers can chose to distribute their code for free but if they develop using GNU licensed software, the only requirement is that they distribute any changes they make in an effort to encourage continued public development.
One way that closed-source software is referred to by open-source advocates is similar to buying a car with the hood nailed shut - a product with no ability to view, change, or improve its internals.