From the SAP Terminology Guide:
Business Objects are "a set of entities with common characteristics and common behavior representing a well defined business semantic. This set is generally accepted in the business world (e.g. in an international standard or industry best practices). Examples include: Purchase Order, Sales Order, and Customer." (Source: SAP)
Business objects are key to service-oriented architecture because they form the foundation for a well-organized program of service enablement. Usually, if an application is well-designed and well-organized, its functionality is divided into units called business objects that promote reuse of functionality and reduce the complexity of the application.
When business objects exist in an application, service enablement proceeds much more smoothly because services can be created easily, sometimes automatically, based on business objects. Services created based on business objects are easier to create and are less prone to unpredictable side effects, as can sometimes happen when services are built on applications that do not have well-designed business objects. In enterprise SOA, every enterprise service has an associated business object.
Disambiguation: Business objects in enterprise SOA versus Business Objects (the company)
In January 2008, SAP purchased a company called Business Objects. Business objects in enterprise SOA are as defined above and as you find them in the ES Workplace; the acquisition of this company and its technology by SAP relates more closely to SAP solutions for Governance, Risk, and Compliance, referred to as GRC. You can read more about Business Objects (the company) and its relationship to SAP here.
In SAP TM (Transportation Management), business objects are the base components of the system. They are handled in a different way than business objects in other SAP areas. Transaction /TMSF/CONF_UI shows all available objects.