Esoteric means the "inner" (eso-), in the sense of the inner consciousness; the contemplative, mystical or meditative transpersonal perspective. This is something different from the ordinary everyday understanding of things, and can only be understood by intuition or higher mental or spiritual faculties.
The opposite of Esoteric is Exoteric, which means the "outer" (exo-), i.e. the outer or surface or everyday consciousness. This includes both the scientific-materialistic and the conventional (or literal) religious perspective. As it is based on the everyday understanding of things, and does not require any transformation of consciousness (and indeed considers any such transformation to be harmful), it assumes that the everyday mind alone can understand Reality. (Things are not always that simple though, because in order to do, say, quantum physics one requires a mathematical intuition not shared by many).
Central to the distinction between Esoteric and Exoteric is that of states of consciousness. An Exoteric philosophy or religion as one which is based on the normal waking state of consciousness, or a modified state of consciousness which is still pretty close to the normal waking state. Any aspiration beyond the ordinary state of existence is discouraged. For example, according to the religious person, "God created/loves you just as you are", so who are you to question what God has ordained for you by striving for some higher state of consciousness? While according to the sceptical Materialist, there is no higher state beyond the rational mind anyway (all non-rational states of consciousness being delusionary).
In contrast, all true Esotericism is Gnostic. That is, it is based on Higher Knowledge, or Gnosis, to use the Greek term. Gnosis is a much superior way of understanding than Reason. Reason stumbles around with premises and logical arguments, and uses these in its own way, without regard for higher truth. With reason alone, you can equally prove or disprove any statement. Certainly, used properly, reason is an invaluable aid to understanding and approaching the Truth. But used improperly, it can cunningly justify any statement or argument, no matter how patently false. It is through this negative use of reason that the inferior religious and sceptical materialistic philosophies are able to flourish.
Thus we have (putting it of course simplistically) two fundamental positions; the Exoteric literal religious-and-scientific position, which requires no transformation of consciousness, and is therefore accessible to the "average joe"; and the Esoteric "mystical" and philosophically sophisticated position, which is based on the transformation of the self and the understanding of the nature of reality. Of course, I need to emphasise here once again that this is an oversimplification of what is not really a clear cut few and many dichotomy at all. For example the understanding of an "exoteric" (no need to attain a mystical/transpersonal state) science such as physics is accessible to only a small percentile of the population (which is why there are so few talented physicists), whereas the average person (if spiritually inclined) is much more easily able to understand and assimilate mystical or at least New Age topics, such as homeopathy, "geopathogenic zones", eastern teachings (especially as presented by a guru), and so on.
With this in mind, I present the following, very simplistic, tabulation.
|Preferred state of consciousness
|Normal waking consciousness
|Expanded; meditative or spiritual states
|Transformation of personality
|Means of knowledge
|Reason (secular), Belief (religious)
|Higher Inspiration and Intuition ("Gnosis")
|External (Bible, Church, Science, etc)
|Internal (Inner feelings and intuition)
|Philosophy or teachings
|Narrow; only one authority (Bible, Scientific method,etc), everything outside that is considered false
|Broad; universal, is able to draw from many different teachings, both exoteric and esoteric
|Simplistic (Materialism, Dualism, or Holism)
|Sophisticated (complex cosmology, psychology, ontology,etc) - Emanationism, Dramaturgism
|Concept of Absolute Reality
God (Dualism): i.e. God is mainly considered as a separate, external being
or Space-Time-Energy (Materialism) - the "unified field theory" or Theory of Everything or some such holy grail of physics
|Universal Consciousness (Monism)The Divine is within as well as without
The above table therefore presents things in a very simplistic way, as the distinction between Exoteric and Esoteric is never so clear cut. The whole idea of such a dichotomy comes about through the establishment of the various Monotheistic religions (Judaism, Christianity, Islam, etc) in dogmatic form. Due to the impossibility of reconciling literal scriptural theology with mystical insight, a very sharp demarcation naturally appears between, say, conventional Judaism and Kabbalah, or conventional Islam and Sufism. But in the East, especially India, no such distinction is necessary, and one finds instead a smooth gradation from exoteric to esoteric, with all positions being equally acceptable. In any case, especially in traditional or established forms of esotericism (Buddhism, Sufism, Kabbalah, etc), there is always some conceptual dogma, so we have esoteric religion, a religion based on mystical experiences, but still interpreting them according to an a prior analysis. Most mystical and esoteric streams within religious traditions get around this problem by the use of sophisticated Hermeneutics. In the Western world this problem was further exacerbated by the rise of scientism, rationalism, and Protestantism. A good example of the difficulty of separating esoteric from exoteric can be seen by looking at the distinction between so called "rabinic" or Legalistic Judaism and the occult movement of Kabbalah. One would think that there could be no more distinct counterpoles, but a deeper study shows that the situation is no-where near as clearly defined, even here.
In fact, the very idea of a sharp Exoteric-Esoteric dichotomy is a recent one, developing out of the Traditionalist school of Guenon, Schuon etc on the one hand, and Theosophy and later occult movements on the other. Such schools of thought acknowledge a universal current of mystical revelation in that is the living heart or spirit behind the external esoteric legalistic surface of religion.
It should also be pointed out that other definition of "Esoteric" or "Esotericism" has been used by the "New Age" movement of the seventies and eighties to simply mean any acceptable non-materialistic and non-conventional-religious metaphysic. So one could equally refer to Theosophical concepts of the Astral body or of nature spirits, or Buddhist teachings regarding higher states of consciousness, as "esoteric". In this context, "Esoteric" becomes a meaningless blanket term for any non-physical realities or knowledge.
When a teacher proclaims seeking the Highest One aside of established revelation and the orthodox community, before long a new orthodoxy arises around that teaching too, as in the case of Jesus with Judaism, Budhha with the Vedic Brahmanical religion of his time, Nanak with the Hinduism and Islam of his time, and so on. It is apparently an ongoing dialectic due to the circumstance that many people who are not evolved enough to let go of their enculturation.
The problem is that as soon as a teacher asserts something spiritual, it soon takes on the character of a metaphysical model whose interpretation by the majority of powerful becomes privileged (orthodox). The alternatives are either to disguise one's assertion poetically (Kabbalah, Mystical Christianity and Sufism) or else to abjure all modeling as misleading, which is the Zen alternative. Because the more fundamentalist orthodoxy is so politically powerful in Judaism, Christianity and Islam, the sages of Kabbalah, Mystical Christianity and Sufism have relied on poetic metaphors to disguise an underlying model which the orthodox would likely deem heretical and react against. Zen, on the other hand, abjures model construction almost entirely because it sees models as establishing boundaries whereas the aim of the teaching (dharma) is the Boundless.