What is colloidal silver? It is a suspension of tiny silver particles in water. Similar to one of those glitter lights like this:
Except instead of foil you have really really tiny silver particles, and the suspension medium is distilled water.
Why make colloidal silver? Some claim it has anti-bacterial, anti-fungal, and anti-viral properties. It can be applied topically (i.e. a burn or cut), ingested, or added to water to help purify.