MSDE is a scaled-down version of the SQL Server engine that's free to install and distribute. It's similar to SQL Server, except for a few limitations:
MSDE is an ideal platform for testing ADO.NET code if you don't have a SQL Server database handy. You can even install it alongside an instance of SQL Server if you don't want to test with a production server. Best of all, databases created in MSDE can be easily migrated to a SQL Server installation.