Ultimately a prototype is just a tool for learning and discovery. So what you build depends on what you're trying to learn or work out. I've built prototypes as powerpoint decks, basic HTML/CSS, and as apps built in Rails or PHP. Sometimes with a database backend - or with some spoof of one.

In the context of the average web app then, a html/css prototype (which can later be used in the project) would be a decent prototype. As long as they convey what the requirements of the project are.

The answer varies depending on who's talking - ask for clarification from the specific people you happen to be dealing with.

Short answer: It depends.

Long answer: In my experience, prototype is used very loosely and can mean many things. But the point is that a prototype is not a fully functioning app/system/software yet. It is used to demonstrate the possible features/functionalities that the app would/could have. How you demontrate it depends on the specific case. Some prototypes can be created using a simple word/powerpoint slide, some can be created using mockup screens/wireframes and some are semi-functioning products. I do not think there is one single answer to this.