Security researcher Jonathan Brossard created a proof-of-concept hardware backdoor called Rakshasa that replaces a computer's BIOS (Basic Input Output System) and can compromise the operating system at boot time without leaving traces on the hard drive.
In short, firmware is software that is stored in non-volatile memory on a computer chip, and is used to initialise a piece of hardware’s functionality. In a PC, the BIOS is the most common example of firmware but in the case of wireless routers, a whole Linux operating system is stored in firmware.