The G0 phase is a period in the cell cycle where cells exist in a quiescent state. Cells enter the G0 phase at the beginning of what would otherwise be the G1 phase. These cells appear to have stopped at the G phase of the cell cycle and do not seem to continue onto the other phases. Cells that are permanently in the G0 phase are called postmitotic cells. An example of such cells are neurons.
Following mitosis, the daughter cells may re-enter the G1 phase, or a phase called G0, where growth and replication stops. Cells in G0 are said to be "quiescent". G0 cells may eventually re-enter G1 or perhaps die.
The distinction between G0 and G1 is not a very good one, and to be honest,in the literature the terminology is pretty inconsistent. Often, this phase is referred to as G0/G1. When people use the term G0, it implies the cell will not be re-entering the cell cycle (will not be dividing). The term is often used to apply to senescent (old) cells, muscle cells, or neurons. G0 cells have low levels of cell cycle proteins, such as cyclin dependent kinases, and low levels of growth factor signalling proteins such as ras and myc. These proteins are necessary for the cell to traverse G0 and go on through the cell cycle. G1 cells are primed to go through the cell cycle, they are just waiting for an appropriate signal to divide. This signal can be a growth factor or a hormone, for example. G0 arrested cells CAN enter G1 and go through the cell cycle in some circumstances.