K-Y is a brand-name product from Johnson & Johnson, and was is designed to provide lubrication during insertion (sexual or medical) into body cavities.
Most people know it as a way to provide better, easier penetration during sexual activity, either providing additional vaginal lubrication or providing total lubrication where little is naturally provided (for example during anal sex). However, it is also used to provide lubrication when inserting medical instruments (rectal thermometers and enema pipes, for instance), to make the patient a little more comfortable.
If you are using condoms, it is better to use K-Y or a similar water-based lubricant rather than oil-based products such as Vaseline, as the latex used in the vast majority of condoms is likely to be weakened by oils, possibly compromising the prophylactic capability, and that is generally considered a Bad Thing. The standard lubricant offers no protection against STDs, but there is a variant (K-Y Plus Spermicidal) containing the spermicide Nonoxynol-9 (which also apparently offers some protection against the HIV virus).
Interestingly, despite its popularity (probably due to brand-name identification), a consumer survey and research exercise rated K-Y poorly compared with other lubricants such as Astroglide and H-R; nevertheless, it does have the advantage of being a well-known and widely-available product, found in most shops and supermarkets. (http://www.sexuality.org/l/cu/lube_25.html)
Finally, it has to be said that for all its good, it has a deleterious effect on sperm motility (as do many other commonly-used lubricants), so anyone suffering with male infertility, and trying to conceive should seek alternative products, such as Astroglide. (http://www.duj.com/Article/Moreira.html)
For completeness, the ingredients are: Chlorhexidine Gluconate, Glucono Delta Lactone, Glycerin, Hydroxyethyl Cellulose, Methylparaben, Purified Water and Sodium Hydroxide.