Canon means “center,” and a literary canon is a set of works which are considered by a culture group as central or essential to its identity.
The Western literary canon begins with Greek Classical age works and extends through most of American and European classic literature. Most people believe a canon is defined by works of quality and endurance across generations.
The Waywords Podcast Episode 2 argues that literary canons are defined by their application to schooling, how readers are formed with particular values. It may be easier to think of contemporary canons and how they function for a culture: Is Dr. Seuss appropriate or not appropriate for English-speaking children? Which works are part of the Star Wars canon and why?