.onion is a pseudo-top-level domain host suffix (similar in concept to such endings as .bitnet and .uucp used in earlier times) designating an anonymous hidden service reachable via the Tor network. Such addresses are not actual DNS names, and the .onion TLD is not in the Internet DNS root, but with the appropriate proxy software installed, Internet programs such as Web browsers can access sites with .onion addresses by sending the request through the network of Tor servers.
.onion, for all intents an purposes, acts like a top level domain (like your .com’s, .org’s, etc), but is not accessible like a normal webpage. For this reason, it’s called a pseudo top level domain.
Not only does this encrypt server-side data, but increases anonymity as well. It’s been said that on the Tor Network, not only is it impossible to tell where the site is hosted – it’s impossible to take it down, as well.
If your willing to open up the puzzle box take a trip over to the torproject.org website.