A double boiler (compare prices) consists of a flat-bottomed insert that fits into a pan of simmering water. The double boiler insert isn't actually submerged in the water underneath; there is a gap between the water level and the bottom of the double boiler insert. That way, the item in the double boiler is heated by the steam from the liquid below, not the hot water. This makes the heat more gentle and indirect.
A double boiler is sometimes said to be the same thing as a bain marie, but this isn't quite correct. In a bain marie, the pan or dish is actually submerged in a hot water bath. See the procedure for making creme brulée, for example. Moreover, a bain marie is usually used for oven cooking, whereas a double boiler is used on the stovetop.
Double boiler substitute: If you don't have a double boiler, you can use a heat-proof bowl over a pan of hot water as a double boiler substitute. Just make sure the hot water doesn't actually touch the bottom of the bowl.