The definition overlaps with the grammatical term contraction, but contractions are formed from words that would otherwise appear together in sequence, such as do and not to make don't, whereas a portmanteau word is formed by combining two or more existing words that all relate to a singular concept. A portmanteau also differs from a compound, which does not involve the truncation of parts of the stems of the blended words. For instance, starfish is a compound, not a portmanteau, of star and fish; whereas a hypothetical portmanteau of star and fish might be stish.
The word portmanteau was first used in this sense by Lewis Carroll in the book Through the Looking-Glass (1871), in which Humpty Dumpty explains to Alice the coinage of the unusual words in "Jabberwocky", where slithy means "slimy and lithe" and mimsy is "miserable and flimsy". Humpty Dumpty explains to Alice the practice of combining words in various ways:
You see it's like a portmanteau—there are two meanings packed up into one word.
Humpty Dumpty's theory, of two meanings packed into one word like a portmanteau, seems to me the right explanation for all. For instance, take the two words "fuming" and "furious." Make up your mind that you will say both words, but leave it unsettled which you will say first … if you have the rarest of gifts, a perfectly balanced mind, you will say "frumious."