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What are they?A graphic novel is a story told in a comic book format. The term "graphic novel" is incredibly broad, and can refer to fiction and non-fiction of all kinds.
What differentiates them from comics?Graphic novels tend to be longer than comic books; and focus more on telling a story than showing how amazing a character is. Graphic novels are also more straightforward than comic books; never branching out to tell multiple stories.
Famous graphic novelsWatchmen was written by Alan Moore and illustrated by Dave Gibbons in 1987. The story is a murder mystery investigating the death, arrest, and disappearance of masked vigilantes. It's a critique of the superhero concept and is meant to show why being a superhero isn't as fun as one would think. Definitely worth reading.
Special thanks to Tayasaurus for editing the clear background for meBone was written and illustrated by Jeff Smith over the course of 13 years from 1991 to 2004. The story follows three cousins who, after being driven out of their hometown, stumble across a mysterious valley sending them on a long fantasy adventure. It's one of those comics where it's best to read with as little knowledge as possible. It's funny, epic, and has one of the best story arcs I've ever seen. If you've never read this comic before, I highly recommend you do.
Need I say anything? Originally started in 2003, the Walking Dead is a zombie story written by Robert Kirkman. Despite being another zombie story, it does a really good job at being more than just another zombie story. I actually haven't gotten very far into the series, but I've started reading it and really enjoy it so far. Definitely better than the godawful TV series.