Selenium IDE is a tool that allows users to record, play back, and debug tests of web applications directly inside their web browser. It was originally developed by Shinya Kastani as an extension of the Selenium core JavaScript code. Selenium IDE records user interactions on a website as functions and allows those functions to be played back to test the site's functionality. While only compatible with web-based applications, Selenium IDE provides advantages like supporting multiple browsers and platforms, error handling, and test data-driven testing. It works by sending test commands from a client library to the Selenium server, which then executes those commands using the Mozilla Firefox browser and returns testing results to the user.