In 1709, chemist Johann Farina created a fragrance blend of citrus and cedar and named it for the town where it was conceived. Cologne, Germany, thus became the production point of one of the most popular scents of its time.
Farina's Eau de Cologne is still sold today in its original recipe, and that product is the only true Cologne (with a capital C), much the way the only true Champagne comes from the Champagne wine region in France. Today, though, many people -- especially in the United States -- use the term "cologne" (lowercase) to mean "men's fragrance," a cultural tweak that has become common usage.
What all colognes, true or not, have in common is their concentration of essential oils. Eau de cologne is a weak formulation, typically containing anywhere from 2 to 5 percent essential oils in a base of mostly alcohol but also water, which characterizes most fragrances. The low concentration results in several qualities that distinguish cologne from other forms of scent. First, the cost per ounce is one of the lowest, and the scent only lasts for an hour or two. Second, it's the scent's top notes (the first ones you smell after application) that are dominant. Because cologne fades quickly, other scent components of the recipe tend to fall away, resulting in a product that may smell markedly different from other versions of the same fragrance. (See What does dry-down mean? to learn about fragrance notes.)
The formulation known as eau de toilette is close to cologne on the concentration scale, containing approximately 5 to 10 percent fragrance oils. Some perfume houses use the terms interchangeably, along with "eau fraîche" (or "fresh water"), to describe a low-concentration product. Regardless of the name, it's a formulation that allows the user to apply more, and more often, without being over-scented.
Eau de parfum, on the other hand, requires more restraint.