Wikipedia
XBCD is a driver that allows owners of an Xbox controller to use it on a Windows computer. The controller itself is a USB device with an extra wire (V-sync, usually yellow). With an appropriate adaptor, users can use the controller with a PC.
XBCD also supports wired Xbox 360 Controllers, allowing them expanded support for DirectInput.
The actual software allows users to use the vibration functions of the Xbox controller, and remap the buttons and axes of the controller. As an example, pressing X on the controller could be mapped so that it increments the X-axis in whatever game you are playing.
XBCD uses DirectInput 8, and support for Xinput is provided via the bundled xinput wrapper that users must copy into their games directory.
Current development of XBCD aims to improve wired controller compatibility. Wireless controllers for the PC are known to have issues using XBCD as they require a driver for their individual receivers, and report different values than the wired controller.
A new version of the setup utility has been developed to support both Xbox 360 and Xbox controllers, as well as improving performance when running and adding various user interface enhancements.
There is also an alternative Driver for the Wireless Xbox 360 Controller called X360WC.