A 'don' is a senior member of a college. This includes the head of that college and any fellows of the college. The term is also used more loosely to include all of the tutors within a college.
The word is derived from the latin 'dominus' (meaning 'lord') in the same way that the spanish word 'Don' (as in Don Juan and Don Quixote) is.
The reasons that the term is only used in relation to Oxford and Cambridge universities are:
(a) these universities are much older than most other universities and therefore more likely to use terminlogy derived from latin; and
(b) these universities are the only universities in England, other than the much more recent University of London, to have a college structure.
Chris