Challah refers to a portion of dough, separated from that used to make the family's bread, and given as a gift to the Kohen (priest). His wife would then use the many gifts from the community to make her own bread to feed their family. In the absence of the Temple in Jerusalem, challah is no longer given to the Kohen. Instead, a small portion of the dough is now separated out, burned, and discarded.
The term "challah" typically refers to the bread eaten on Shabbat, and today, handcrafted challah covers and plates adorn the tables of many Jewish families and are used during the HaMotzi blessing. While the Hebrew people were in the desert after they were freed from Egypt, God provided them daily with manna and water. A double portion of manna was provided on Friday so individuals would not need to work to collect manna on Shabbat. Two loaves are now baked for Shabbat, placed on a challah plate, and covered. The two loaves represent the double portion of manna, and the cloth cover represents the dew that fell on the manna and preserved it.
The traditional blessing for bread is used for Challah:
Blessed are You, Lord, our God, Ruler of the Universe, who brings forth bread from the earth.
Barukh atah Adonai, Eloheinu, melekh ha-olam hamotzi lechem min ha'aretz.
ברוך אתה ד' אלוקינו מלך העולם, המוציא לחם מן הארץ