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Consciousness refers to the relationship between the mind and physical world. It is a complex system that includes memory, cognition, input from senses, and an awareness of selfhood. It is essentially the cognition of one's self, one's past, and one's potential futures at any given moment. The term "self-conscious" is often used to refer to acute self-awareness which results in feeling of unease in social settings and the fear of possible embarrassment.
We do not know why or even when consciousness evolved.
 Scientific understanding
Despite consciousness being the central way in which the universe is experienced by human beings, there are still many mysteries surrounding it. David Chalmers, Australian philosopher and professor, believes that while there are many "easy" issues about consciousness that can be addressed (how the brain stores memories, how attention works, how we organize ourselves, etc.), there is a difficulty in describing in a physical system what it is like to experience something such as a sight, texture, or even a feeling. This problem, that we don't fully understand how a physical system gives rise to consciousness, has led to interesting propositions such as it may be possible that even rocks are conscious. This problem of how the physical neurobiology of the brain and various mental mechanisms gives rise to a seemingly unified consciousness is known as the "binding problem" or "hard problem of consciousness." 
Science has attempted to discover if animals are have consciousness, but without a language, and being able to posit questions "do you see yourself as an agent or merely an inevitable actor?" few scientists are willing to make claims one way or the other. Species more likely than others to have consciousness include the apes, whales, some birds, and elephants. Many philosophers, notably Descartes, insisted that humans are different from animals. however this attitude has largely changed in the scientific community, and the question has shifted more to "how much consciousness do different species exhibit".
The scientific study of consciousness involves Neuroscience, neurolinguistics and psychology.
 Philosophical understanding
Philosophers have looked at consciousness in quite different terms, identifying it less with some biological process that all biologically modern humans possess, but rather with the quest to identify the 'self' in philosophical terms. One argument postulated by philosophers in the 70s, says that consciousness may have been different during the Homeric era from what it is today, since there are no writings of people talking about themselves as "unified internal subjects". In fact, philosophers such as Descartes and Locke were the first to really describe consciousness as we understand the concept today.