To apply directly to the venture capital world, LPs are the ones who provide the capital to the fund manager to invest. Other than providing the capital, they normally have no role in managing the fund (except perhaps an advisory committee role). Regardless of the legal structure of the fund, "LP" is shorthand for investors in a VC fund. To make an analogy, LPs are to the VC funds what the VC funds are to the companies they invest in, with the only distinction that LPs are typically far less involved in the funds they invest in than the VCs are in the companies they invest in.
LPs for large institutional funds are generally university endowments and pension funds.
