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A snapshot is a read-only copy of another database, made at a point in time. Any changes to the original database cause the version of the data when the snapshot was taken to get written to the file used by the snapshot. Therefore, there's a performance hit involved, but it can be very useful for knowing exactly what your database looked like at some point in the past (when you told the snapshot to be created).
It's definitely worth noting that the snapshot contains no data of its own when first created, as it can reference the original database for it, at least until the original database is changed.
When a snapshot is first created, it is an empty shell that delegates all queries (a snapshot is read only) to the original database.
As changes are made to the original database, the pages involved are copied to the snapshot. Queries of the snapshot at this point will be performed on a logical database that is the result of layering the pages in the snapshot over those in the original database.
The effect is that the snapshot appears to be a complete copy of the original database that was made at the same time as the snapshot was created.
One scenario in which this can be useful is in deploying changes. The snapshot can be a very inexpensive form of insurance if something goes wrong. Assuming that only a subset of the pages within the original database were modified during the deployment, only that subset of the pages will need to be copied back from the snapshot to the original database during a restore
