Concretely, it's a file with DLL extention (file type).
It's called "a module", in the FSX-language. FSX will load it, just like any DLL file that is placed in its main folder, or "\modules\" folder. This module will add some features to FSX. The main role of FSUIPC is to offer a communication channel, so that external programs can communicate and interact more easilly with the FSX engine.

What's interesting about this ? We all know that FSX is not able of everything. Its features, the things that FSX can handle, are limited. However, if FSX is not able to do something, you can create an external program that does it instead. Then, via FSUIPC, you offer this program a chance to act directly into the simulator.

SimConnect, which is part of FSX, is doing the same job. A lot of external programs are using SimConnect or FSIUPC to put their hands into the FSX engine, in order to do things that FSX wasn't able to do alone.

There are many examples. FSX is not able to generate ridge lift depending on winds and terrain shape, but the freeware CumulusX can do that, using one of those communication interface to get the plane position, analyze the winds and surrounding terrain shapes, and generate some lift in the sim at the appropriate places.
Also FSX is not able to simulate the VSTOL planes like a harrier, but the RCBO gauges do that instead.

Yes, it's made to allow external programs and module to communicate and eventually "take control" of the simulation engine.

i think its only payware if you REGISTER...
could have changed tough.