From FrugalReef

Live sand is sand that's been colonized by various beneficial microorganisms and other small creatures that will facilitate the Nitrogen Cycle in your aquarium.

The best live sand comes directly out of the ocean, and is teaming with life. It has to be transported warm and wet and treated just like any other organism from the sea. If you can get your sand this way you'll be treated with new surprises every day. The diversity of wild live sand is astounding and beautiful.

Many marine shops also sell a live sand "product" that comes cold in a sealed bag mixed with seawater. I've used this product before, but there's nothing it will do that cheap silica sand or crushed aragonite won't do given time to cycle.