A coupon bond has interest coupons that the bond holder sends to the issuing entity or its paying agent on the dates when interest payments are due. Interest payments are then made to the submitting entity. The interest coupons are normally due on a semi-annual basis.
A coupon bond is unregistered, so the issuing entity has an obligation to pay interest and principal to whomever holds the bond. That is, the bond holder is presumed to be its owner. The issuer does not maintain a record of who is holding each outstanding bond certificate.
Coupon bonds have been largely replaced by registered bonds, where the issuer maintains a record of bond holders.
A coupon bond is also known as a bearer bond.