A Pod is a receptacle where synthetically created humans are inserted into the System to become part of the power plant and the Matrix. Humans are grown in the Fetus fields and, based on Morpheus' description of pods, are immediately connected by a myriad of umbilicals that not only provide the body with sustenance, but draw heat energy from the body to power the Machines and their city. They are gathered and transferred from by Harvesters to full pods in the power plant.
Central to the control of a human in the pod is a data probe that is firmly and permanently attached to the headjack, which provides connectivity of the human's mind into the Matrix. Each human pod is like its own radio station; a carrier signal for each human mind transmits and receives data from the Source to process information needed to form the neural-interactive world of the Matrix.
The human is part of the Matrix computer network until their body can no longer function, or if their carrier signal is interrupted, forcing the human to awaken. From there, docbots appear to be commmanded to eject adult humans from their pod and into the cold, lifeless world of the sewers of the ancient remains of the human cities, presumably to their death. Since a pod-human has never used their body in any significant manner, their muscles are very weak to the point of atrophy, so swimming is a near-impossibility. Young children and adults ejected from their pods may have been "helped" through the intervention of Zion operatives nearby, who rescue ejected humans with their hovercraft and nurse them to health to become part of the resistance against the Machines.
In their only conversation, the Architect warned Neo that, without his cooperation in reloading the Matrix, all of humanity, including the humans connected to the Matrix, would die if the Matrix suffered a system crash from complications caused by its programming.
Millions and millions of these pods are connected to cylindrical towers that form the power plant.