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DEMAT accounts means Dematerialised account need for trading and holding of stocks

Just as you need to have a Demat account for buying or selling or holding of stocks/shares.
It is same as a bank account where actual money is replaced by shares.
You have to approach the DPs (these are like bank branches), to open your Demat account.
Let's say your portfolio of shares looks like this: 400 of Reliance, 250 of LnT, 450 of India Bull and 100 of Idea.
These will be shown in your Demat account.
So you don't have to possess any physical certificates showing that you own these shares.
They are electronically in your account(this is the new and safe way of trading).
As and when buy and sell the shares, they are calculated in your Demat account.
Just like a bank passbook or statement, the DP will provide you with periodic statements of holdings and transactions.

Is a demat account a must?
Nowadays, practically all trades have to be settled in Dematerialised form.

Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed trades of upto 500 shares to be settled in physical form, everybody avoids physical shares due to lack of security and time invested.
So a demat account is a must for trading and investing.

Where do I begin?
Look for a DP to have an account with
Most banks are also DP participants, as are many brokers.
You can choose your very own DP.
To get a list, visit the NSDL and CDSL websites and see who the registered DPs are.

A broker is separate from a DP. A broker is a person, who buys and sells shares on your behalf as you are his clients.

A DP will just give you an account to hold those shares.
You do not have to take the same DP that your broker takes. You can choose your own.
Once you approach your DP, you will be guided through the formalities of opening an account.

You must fill up an account opening form and sign an agreement with your DP on a 100 Rupees bond paper.
The DP will need proof of your identity and address.
You will also require -PAN card, Voter ID, Ration card, Driving licence, Bank account, Landline Phone bill.Also your passport size photo.
You need to have both original and xerox

You can have a zero balance in your account.- No minimum Balance.
If you want to do trading, inform your broker about your Depository Account Number, so that the shares bought are credited into your account.

I suggest you to go through this link

Also let me know if you have any doubts.

Atul Barapatre.