This excellent article presents both the imperative and process for innovation. Must read!
Often, innovation is thought of as creating something new or something from scratch. Invention is innovation but the reverse is not neccessarily true. Innovation is a concept that more often than not "makes things better" or is "new to you." In other words, most things in life are made incrementally better through "do and learn" cycles - each cycle is an innovation. Also, innovation is not an absolute concept in another regard - it depends on the situation and audience.