The word planet means "wanders" in ancient Greek. If you are a careful observer of the sky, there are 7 objects that "wander" against the background stars. These first 7 "planets" were Mercury, Venus, Mars, Jupiter, Saturn, the Moon, and the Sun. As time went on, we realized that the Sun is really a complete different type of object than the others. The Moon is also unique on that list because it does not directly orbit the Sun, so we put it in a different class of objects. Now, let's look at the rest of the list. Before I go any further, go look at a image of the solar system to scale. There is a good image done by the team at Space.com below the break.
So have you looked at it? Good, because then you realize that really Mercury, Venus, Earth, Mars and Jupiter, Saturn (and the later discovered Uranus and Neptune) are really 2 different types of objects. So, we break these up into the inner rocky planets and the outer gaseous planets. Then there are only a few other groups of objects. You have the moons of the solar system, some of which are bigger than Mercury. There is the asteroid belt between Mars and Jupiter. I think to most people it is clear why even the largest asteroid, Ceres, is not a planet. Like the other asteroids, Ceres has a different composition than rocky planets and its orbit crosses with the thousands of other objects that occupy that part of the solar system.
So what about Pluto? Pluto is smaller than our moon, and like Ceres, it shares an orbit. Pluto resides in what is known as the Kuiper belt. Think of the Kuiper belt as like the asteroid belt, only with icy objects instead of rocky ones and a lot farther from the sun. Pluto may not even be the largest object in the Kuiper belt. Eris was discovered in 2005 and has a diameter of 2326 kilometers known to an accuracy of 12 kilometers. Pluto is somewhere between 2300 and 2400 kilometers. Pluto's size is harder to determine because sublimating ices on its surface can give it a little temporary atmosphere. So when it comes down to it, Pluto is a different type of object than the other planets. It is not a rocky world close to the sun and its not a massive ball of gas. Pluto is something else, a icy world that is interesting in its own right, but not to be confused with anything else.
Source: SPACE.com: All about our solar system, outer space and exploration