Linux is the kernel which runs a collection of free packages which together make up the Operating System. Most of these packages are still supported, and the people who support them make more of an effort to have them work together than the people who work on Windows. There is some question as to whether Linux is a separate operating system, or one of the easier to use versions of Unix (though Mac OS X is definitely easier and a version of Unix).
Ubuntu was created by South African Business School Graduate Mark Shuttleworth. If anything can make an MBA respectable, it is what he did. Rather than make a version which will be familiar to Windows Users, as earlier people had, he took a developer's platform, Debian, and made it as simple as possible (mainly by hiring developers but it happens he has some respect as a programmer himself) and has deliberately kept it close to Debian as it has evolved, while keeping it simple.
A news report recently said that the French Gendarmerie had switched from Windows to Ubuntu and saved Millions of Francs. One blog I hang out at had people immediately asking "Why didn't they switch to Mandriva?" (because Mandriva is a French/Brazilian distribution). One thing a spokesman said was that the cost of retraining people was WA-AY overstated in most conversations and publications. At the same time, Ubuntu is -- officially and at least -- a Unix-derived Operating System which is modular and assembled from a large variety of packages from a large variety of developers who can each afford to develop these small packages. One of the oldest currently maintained, GCC and the GLibC libraries, were first created by a man named Richard Stallman who created the license under which most linuxes (including Ubuntu) are distributed, and who described the situation as "free as in freedom, not as in beer" which is where the "free as in beer" statement comes from. You really would do well to get over all your preconceptions about what a computer is and what it does for you if you want to use Ubuntu, but you don't have to.
As I said, it's a marketing thing. If you look at other distributions, Ubuntu is described differently -- you get your packages by making different choices, and the choices other distros offer, often phrased the same way, are closer to the underlying technology than Ubuntu's. But ubuntu makes sure you get the choices you want by its menuing systems and windowing.