A theory is a formal idea or set of ideas that is intended to explain something.

If you have a theory about something, you have your own opinion about it which you cannot prove but which you think is true.

The theory of a practical subject or skill is the set of rules and principles that form the basis of it.

You use in theory to say that although something is supposed to be true or to happen in the way stated, it may not in fact be true or happen in that way.