The girls got theirs from the Easter bunny (instead of baskets) in '08 or '09 and I found the green one at once upon a child when I was pregnant with O. I really don't even know what they are, but they received the toy of the year award in 2010 (preschool division). The idea is that if offers a medium for imagination. And, they do!
My kids play with these EVERYDAY! That is no exaggeration. The Bilibo's live in our living room, under "Busia's chair", and are pulled out all the time.
They sit in them. They sit on them. They spin in them, put them on their heads, put things inside of them. They use them to transport toys from one room to another. The become beds for dolls, stones in the pretend river, astronaut helmets, swimming pools for barbies, the list goes on and on and on.
I believe that the age recommendation is 2-7, but even my 10yr old cousins play in them when they are over! Basically, they're anything toys and they are awesome!