ELI5 version - may be over simplistic:

A hedge fund is a type of investment fund. An investment fund takes a pool of capital and and invests it to earn a return. Mutual funds are one of the more well known versions of investment funds.

What is the difference between hedge funds and other investment funds?

Not everyone can invest into a hedge fund. You must be a "qualified investor". "Qualified investors" must meet net worth and/or annual income requirements. In other words: you need to be rich. Therefore not everyone can invest and hedge funds cannot market to the public.

Hedge funds are not as regulated as other investment funds. They do not have to follow the same rules that other investment funds do. (i.e. 1940 Investment Companies Act, etc.) They are not held to the same reporting requirements and investment restrictions They are able to use various trading strategies to earn a return that are not available to other investment funds. Why? Because all of their investors are "qualified" and are supposedly educated investors who know what kind of sh*tstorm they are about to get themselves into.

Hedge funds charge much higher fees than other investment funds. They will charge an annual management fee (i.e. 2% of capital per year) and will charge an additional incentive fee (i.e. I will take 20% of whatever profit I generate you).

Contrary to popular belief there is no "hedging required". They don't have to tell you, as an investor, what they are specifically investing in. They can lock up your money for an extended period of time if they'd like. They can essentially set whatever rules they want. Of course you would have to agree to the rules as an investor.

This is all very different than let's say, a mutual fund, that is marketed to the public.