Note: At ArcGIS 9.2, Esri stopped selling ArcSDE as a stand-alone product. It is now integrated into both ArcGIS for Desktop and ArcGIS for Server as ArcSDE technology.
ArcSDE (Spatial Database Engine) technology is a core component of ArcGIS for Server. It manages spatial data in a relational database management system (RDBMS) and enables it to be accessed by ArcGIS clients. It is the technology that provides the framework to support long transactions, which facilitates the versioned editing environment in multiuser geodatabases. The geodatabase is the primary data storage model for ArcGIS; it provides a single central location to access and manage spatial data.
Learn more about the architecture of a geodatabase.