The vanilla bean is the seed pod of a broad-waxy leafed orchid. Vanilla beans go though an extensive curing process before they are sold. Although originally from Mexico most vanilla is now produced in Tahiti and Madagascar.
To use a vanilla bean you typically slice the bean open, lengthwise, the scrape out the seeds into the liquid used in the recipe (commonly cream or milk). The recipe will probably suggest you place the bean in the liquid too. The bean or sees are steeped in the liquid to bring out the flavor.