MSDE stands for Microsoft Desktop Engine. MSDE is replaced with Microsoft SQL Server 2005 Express.
MSDE is a free, light weight version of SQL Server. It lacks several advanced features of SQL Server, but still lot of people use MSDE since it is a free version.
Microsoft does not provide a graphical user itnerface (like SQL Enterprise Manager) to manage the databases. However, there are several third party management tools available. Or, you can use a console based interface provided by Microsoft.
Performance throttling prevents too many users accessing database at the same time (Microsoft does not want you to use MSDE for high traffic applications ! Instead, they want you to buy SQL Server)
MSDE is based on SQL Server engine, but is a scaled down version of SQL Server.
Migrating from MSDE to SQL Server is very easy. All you have to do is, uninstall MSDE and install SQL Serer. Your databases and code will work without any change.
MSDE is not for sale as a separate product. It is available for royalty-free redistribution by vendors under certain MSDE licensing conditions.
MSDE allows a maximum database size of 2 GB
MSDE can use a maximum of 2 GB RAM
Supports only 2 CPUs on the server.
Features like Full-text search, profiler, import/export wizards, index tuning wizard etc not available.
MSDE is an outdated database system. If you are looking for free relational database system, you may want to try Microsoft SQL Server 2005 Express edition.