A hue with grey added — a more muted, softer version of the same colour.
Produced by desaturating a hue toward grey while roughly preserving lightness — distinct from a tint (lighter) or shade (darker).
'Tone' is also used informally to mean lightness value generally ('tonal contrast') — the strict tint/shade/tone distinction is a separate, narrower usage.
Sage green is a toned-down version of a brighter grass green.
Tone is what makes many 'muted' or 'dusty' colour trends possible — the same hue, softened.