Vermiculite is a natural mineral, expanded in a heating process.  It's mineralogical name is hydrated laminarmagnesium-aluminum-ironsilicate.  (In case you ever need to know!)

Vermiculite has many uses, but is of interest in horticulture due to these attributes:
¤ Inorganic, and sterile.
¤ No known toxicity or fire hazard.
¤ High water holding capacity.
¤ Absorbs excess nutrients.
¤ Facilitates re-wetting.
¤ Low alkalinity.
¤ High cation-exchange capacity.
¤ Does not deteriorate in storage (if kept dry).
¤ Free from disease, weeds and insects.
¤ Good air holding capacity.
¤ Insulates and minimizes soil temperature fluctuations.

It is used in seed raising mix and propagating mix to allow good root development. 

See our fact sheet on growing plants from seed for more info.