When playing chord-melody arrangements on the guitar (as you will usually do when fingerpicking), the notes you play can usually be divided in the bass note (the lowest note you play; usually a basic chord tone as well), the chord tones which are usually plucked with the fingers at the same time, and the melody notes. The melody notes are usually on the higher (treble) strings and are ornaments and expansions on the basic chord. The (meandering) pattern they follow through the measures and the song is what people call "melody" and is usually the most ear-catching when you listen to the guitar by itself.
I'm not too sure that will explain it well enough, but I think Kirk and many of the other experienced fingerpickers around can put it into words quite nicely
