Demonstrative adjectives point to specific things — equivalent to this, that, these, those. Spanish has three levels based on distance.

Three Levels of Distance

• este / esta / estos / estas — this / these (close to speaker)
• ese / esa / esos / esas — that / those (close to listener)
• aquel / aquella / aquellos / aquellas — that / those over there (far from both)

Examples

• este libro — this book
• esos zapatos — those shoes
• aquella montaña — that mountain over there

As Pronouns

• ¿Quieres este o ese? — Do you want this one or that one?

Neuter Forms

The neuter forms (esto, eso, aquello) refer to abstract ideas or unidentified things:

• ¿Qué es esto? — What is this?
• Eso no es verdad. — That is not true.

Reference:

Wikipedia: Spanish Grammar

https://en.wikipedia.org/wiki/Spanish_grammar