The letters "x" and "y", or any other similar letter in an equation, are examples of unknown variables.
What this means is that we don't know their value, and often the aim of the game is to work this out.
You've been using unknown variables for ages. For example, if you were given a basket and told that: a) it had 20 pieces of fruit; b) it only had bananas and apples in it; and c) it had 12 bananas in it, then you can work out that the basket had 8 apples.
This can be shown using unknown variables - the principle is the same:
When x = apples...
12 + x = 20
x = 20 - 12
x = 8.
More complicated equations work on the same principle - it's just a way for us to find out a value we need to know!