It is a water wheel made of folded paper that spins in the outflow from your filter. Since it is exposed to air but never dries out, it is theoretically the perfect home for your bacterial colony. IMO they are over hyped and noisy and other filter types are at least as good, some are better, and less noisy. Biowheels are great for small tanks where there is not a lot of substrate or filter volume, but i don't like them on larger tanks. However some people swear by them, it's just my personal opinion and lots of people will disagree with me.
Edit: by the way, if you do a google ~image~ search for "biowheel" you'll get a couple examples of what they look like.