Blender is a free open source modeling software which also has a few added features. If you are familiar with other modeling software like Maya or 3D Max it is basically a free opensource version of those.
It features all the standard features like rigging, animation, material creation, scultping, ect. It also in some aspects goes beyond just a 3D modeling software, for example it includes a "complete"1
game engine in it which allows you to create games in it. Here is a the websites feature outline if you are curious http://www.blender.org/features/
I have seen Blender mainly used as a software to create 3D and 2D assets for games, though I have also seen it used to make 3D movie clip (And full movies) and simple 3D games (Mainly used as a level editor).
In reality blenders "game engine" really doesn't stack up to modern game engines like UE4, Cryengine, ect. Don't get me wrong it is not a bad system but Blenders main use is as a modeler and not a game engine so the game engine functionality kinda gets pushed off to the side a bit.