Technology refers to the materials and interactions that make a game possible. This can be as complex as a game console or as simple as a pen and paper, depending upon the game.
Jesse Schell considers technology to be an important element of any game, and classifies it as part of his Elemental Tetrad in his book The Art of Game Design: A Book of Lenses (Schell 42). Schell holds that technology sets the parameters for all interactions in the game, and ought to be chosen carefully, especially when considering the "hype" surrounding certain technologies (409).
Schell holds there are two types of technology. Foundational technology makes a certain experience possible, while decorational technology simply makes that experience better (405). The analogy he uses is one of a cupcake: the cake itself is foundational, while the frosting is decorational. Inexperienced game designers often mistake the two or focus too much on the interesting decorational technology, causing their games to suffer.