Just some odds and ends that may help clarify some the great information that's already been posted.

The term degree is also used to designate the numbers assigned to the notes of a scale. So in the key of C major, the note E represents the third degree of the scale.

The term tonic—from tone—refers to the first degree of a major scale. In the key of C, C is the tonic note. A tonic chord is just the chord with the same name as the root key.

The term subdominant refers to the fourth degree of a major scale. In the key of C, F is the subdominant. A subdominant chord (F in the key of C) is the chord with the same name as the fourth or subdominant note of the scale in the root key.

The term dominant refers to the fifth degree of a major scale. In the key of C, G is the dominant.

(I hope all this talk of dominance isn't getting anyone too excited.)

A dominant seventh chord, then, is the major triad (1-3-5) based on the dominant note of the root key with the addition of the flatted seventh. The seventh is a flatted seventh because the major seventh note in the scale of the dominant chord (F# for the G chord in the key of C) is not found in the major scale of the root key.

      - Mark