Originally appearing in the ReBirth software synthesizer in 1998, the protocol has since evolved into an industry standard.
This allows, for example, the output from synthesizer software to be fed directly into a linear editor without the use of intermediate files or analog transfers.
A Device is a dynamic link library that only generates sound; it has no user interface.
A typical setup would be to use Ableton Live in "Host" mode, and use Propellerhead Reason as a synthesizer.
In fact, an application could (at the discretion of a developer) act as both a Host and a Panel at the same time.