Kusama is a pre-production environment for Polkadot, a separate chain that mimics the main Relay Chain of Polkadot, and where all the developments and updates for the main chain are tested first. However, as a pre-production environment, Kusama operates with real crypto-currencies and real transactions, but with looser rules than on Polkadot. However, the goal of the applications and side chains developed on Kusama is to be migrated to Polkadot at some point. Because of the looser rules, it's easier for a project to test things and grow a community while developing the protocol. Once the final product is ready, everything can migrate to the production environment.