its basiclly a file type.... when u make a sig or peice of work in Photoshop, the filetype with all the layers savedinto it is .PSD
I actaully ask this same question a few years ago when I started learning about renders, photoshop etc. Its bascailly a save format for Photoshop. For example you must know that images come in different formats like jpeg, gif etc. Well when you save a Photo in Photoshop lets say you want to edit it at a later time you save it as PSD so its much easier to edit.
This thread should belong to here http://www.gamerenders.com/forum/index.php?showforum=88 PSD : You can only able to open it with photoshop .. And edit with photoshop ...