Sed is a non-interactive stream editor that was developed in 1973-1974 at Bell Labs. It performs basic text transformations on an input stream by reading from a file or standard input. Some key features of sed include searching for patterns using regular expressions, substituting strings, deleting lines, and printing/extracting parts of lines. Special characters like ^, $, ., *, and [] have special meanings when used in regular expressions with sed. Sed can manipulate line numbers to print or act on ranges of lines. Overall, sed is a powerful UNIX tool for searching, filtering, and transforming text in a non-interactive way.