It's a shortened form that has become commonly used to refer to:
* Demonstration: A public display or exhibition of something, especially a new product or invention.
* Demo recording: A shortened version of a song or musical piece, often used for promotional purposes.
* Demo version: A preliminary or unfinished version of something, such as a software program or website.
The use of "demo" as a shortened form is a classic example of how language evolves to become more efficient and informal.