From what I've learned it is basically crushed fossils. Full of calcium. it is also microscopically speaking very jagged and sharp so it helps with mites and other small exoskeleton creatures as it cuts the skeleton and causes them to dry out and die.
To us it looks like a fine white powder similar to flour but more coarse. Apparently it's important to get "food grade" DE. I guess the food grade stuff is from fresh water and the other is from salt water. When I was a kid our pool used a DE filter and it's still quite a popular way to filter a pool.
Of course, the food grade is substantially more expensive but I was lucky enough to find a local supplier so I don't have to pay shipping which seems to be the big killer.
I sprinkle some around the coop. It helps with mites and keeps things dry. I also mix a little in with their food as suggested to add calcium to their diet.
As ddawn says, search the forum, their is PLENTY of info here on it.