Simply, it is ease with which an asset or security can be converted into ready cash without affecting its market price.

In other words, liquidity describes the degree to which an asset can be quickly bought or sold in the market at a price which reflects it's intrinsic value.

What is Considered as most liquid asset?

Cash in hand is considered as most liquid asset, because it can be quickly and easily converted into other assets. 
Other assets, such as tangible assets, real estate, fine art and collectibles are all relatively illiquid.

Example: If you have to buy a mobile device, then you will approach to market, there cash in your pocket, can be easily used to purchase your mobile.