From LQWiki

Either a hardware or software device that is designed to feed back the keystrokes on a computer's keyboard to some 3rd party. Some companies employ these for security reasons on systems (which could be deemed "legitimate use", as scary as that sounds). But mostly they are used by crackers who are looking to break into systems with malicious intent, as in the case of the Staples employee in New York City who used one to obtain the passwords to dozens of Staples clients' e-mail accounts and banking web sites.