Taken literally, it means "I bow to you". The word is derived from Sanskrit (namas): to bow, obeisance, reverential salutation, and (te): "to you".
When spoken to another person, it is commonly accompanied by a slight bow made with hands pressed together, palms touching and fingers pointed upwards, in front of the chest. The gesture can also be performed wordlessly and carry the same meaning.
Also when greeting a peer, a namasté can be said together with hands in front of chest and a slight bow. To indicate deep respect, one may place the hands in front of the forehead, and reverence for a god or the holiest of persons may be indicated by placing the hands completely above the head.
Namasté is also used as a friendly greeting in written communication, or generally between people when they meet.
In some parts of India (for example, Punjabi-speaking areas), namasté is used not only to greet Hindus but everyone. The proper greetings for Muslims are Assalamu Alaikum and for Sikhs Sat Sri Akaal respectively. But namasté is accepted in all religions.
However in Sri Lanka, this usually has a somewhat different meaning. The gesture is used to greet (as well as a parting remark) people with the verbal "Aayubowan", hence it is called Aayubowan. Aayubowan roughly means 'may you live long'. When used at funerals to greet the guests, the verbal part is usually omitted. The aayubowan gesture is also a cultural symbol of Sri Lanka and Sri Lankan hospitality. This is also the means used by Sri Lankan air hostesses to greet passengers, and is used in other hospitality settings. When the gesture is performed with hands in front of the chest it is usually considered as aayubowan. When hand position is higher it usually means reverence and/or worship. The higher the hands, or the expression with hands placed on top of one's head, is usually the sign of utmost reverence or respect.
The gesture used when bowing in namasté or gassho is the bringing of both hands together, palms touching, in front of the person—usually at the chest, or a higher level such as below the chin, below the nose, or above the head.
This gesture is a mudra, a well-recognized symbolic hand position in eastern religions. One hand represents the higher, spiritual nature, while the other represents the worldly self. By combining the two, the person making the gesture is attempting to rise above his differences with others, and connect himself with the person to whom he bows. The bow is symbolic of love and respect.
Particularly in Hinduism, when one worships or bows in reverence, the symbolism of the two palms touching is of great significance. It is the joining together of two extremities—the feet of the Divine, with the head of the devotee. The right palm denotes the feet of the Divine and the left palm denotes the head of the devotee. The Divine feet constitute the ultimate solace for all sorrows—this is a time-honored thought that runs through the entire religious ethos.
In recent times, and more globally, the term "namasté" has come to be especially associated with yoga and spiritual meditation all over the world. In this context, it has been viewed in terms of a multitude of very complicated and poetic meanings which tie in with the spiritual origins of the word. Some examples:
That said, these are all arguably simply attempts at translating the same concept, which does not have a direct parallel in English. In Buddhism, the concept may be understood as Buddha nature.