SQL Server Profiler is a client application that allows users to monitor events in SQL Server. It works by using SQL Trace, which defines events, columns, and filters to monitor. Profiler is useful for analyzing application behavior, troubleshooting, performance tuning, and auditing SQL Server. It works by event providers producing events that are filtered and queued before being traced. While useful for monitoring, Profiler can impact server performance if too many events and columns are selected.