what is innovation?

I feel that innovation is a buzz word now a days. What is innovation? Is it a new material that lowers the cost of a product? Is a different shaped package that increases sales? What exactly is innovation?

If innovation is a new solution to a problem then would every design be innovative. Every design is the solution to a problem. (every design should be the solution to a problem)

I am very intrested to see what everyone thinks about this.