Muggles' Guide to Harry Potter/Magic/Muggle

Overview
A Muggle is a non-magical human. Most Muggles don't know about magic or any of the wizarding world.

Extended Description
For most wizards, Muggles are regarded with fondness. Poor, non-magical people, how ever do they survive without magic? Some wizards are bemused or intrigued by the techniques and gadgets that Muggles use to get around their lack of magic. For a few, though, Muggles are inferior, and they and anyone descended from them should be exterminated. This long-standing belief in what is called blood purity, apparently championed by Salazar Slytherin over a thousand years before our story opens, is being used by Lord Voldemort as a recruiting and control tool.

Analysis
The Dark belief in the inferiority of Muggles conveniently disregards the facts that many of the strongest wizards alive, including Voldemort himself, are children of Wizard / Muggle marriages, and that the top grades in Harry's year, for all the first six years of Harry's high school career, have been won by Hermione Granger, the daughter of two Muggles. Harry Potter, another strong wizard, is tarred by the same brush, as his mother was a child of Muggles. This belief also ignores the fact that scions of older Wizarding families like the Longbottoms sometimes are not terribly powerful wizards.

Despite their fondness for Muggles, many wizards do feel that they are somehow diminished by their lack of magic; in fact, Professor McGonagall remarks, in the first chapter of the first book, that the Dursleys "are the greatest load of Muggles you'll ever come across." Many Muggles who are aware of the Wizarding world, such as the Dursleys, chose to ignore the magical community, denying the evidence even if it is plainly clear that there is magic happening all around them. In the context of Professor McGonagall's remark, the comment does not directly refer to the Dursleys' denial of magic, as that has not yet been observed by Professor McGonagall. One must wonder whether McGonagall meant "the worst sort of Muggle", or "the worst sort who happen to also be Muggles."

Greater Picture
We will learn that the belief of Wizard superiority to Muggles is very widespread; even Albus Dumbledore, as a youth, envisioned a world in which Muggles accepted the benevolent rule of wizards.

The Wizarding World and the Muggle World
Part of the job of the Ministry of Magic is keeping the Wizarding world concealed from Muggles. When a Muggle sees something related to the Wizarding world, the Ministry sends out wizards who adjust the Muggles' memories to eliminate their recollection of the event. Among the very few exceptions are those Muggles like the Prime Minister, who we see in Harry Potter and the Half-Blood Prince, who must assist in the Wizarding world's interaction with Muggles; Squibs; and the Muggle parents and siblings of half-blood or Muggle-born witches and wizards. The most dangerous near-breach of this concealment on record, according to Fantastic Beasts and Where to Find Them by "Newt Scamander", occurred when a Common Welsh Green dragon swooped over a group of sunbathers at Ilfracombe in 1932. A vacationing Wizarding family prevented catastrophe by performing the greatest number of simultaneous Memory Charms in recorded history on the residents of the town.

Why it is important that the Muggles remain unaware of the Wizarding world is never fully explained. In Harry Potter and the Philosopher's Stone, Hagrid explains to Harry that if the Muggles knew that there were wizards living among them, they would expect the Wizards to solve all their problems using magic. The International Statute of Wizarding Secrecy, agreed to in 1692, codified this withdrawal of the Wizarding World from the Muggles. One gets the impression that Hagrid's explanation is rather weak, and perhaps not very charitable, but it is the sort of myth that quite naturally would have emerged around the Statute when its true reasons, whatever they were, had been all but forgotten by the masses. (Apart from the non-in-universe reason, of course, that the author had to look for a way to make our non-magical reality seem to fit with the story.) At the time of its enactment, according to "Newt Scamander", the Statute was considered a means of protecting Wizards from the Muggles' fear of magic and its practitioners. One aspect of this Statute is the Decree for the Reasonable Restriction of Underage Sorcery, which Harry falls afoul of on three occasions.