Perhaps more interesting than the ability to trade in-game items, however, is the ability to trade Steam gifts. Any game that was purchased as a gift (or as an extra copy as part of a bundle) can be traded for items or other Steam gifts. Naturally, there are some restrictions, most notably that any such game must never have been played. Once a Steam gift has been opened, it can no longer be traded.
As part of the service, all Steam users now have an inventory that can be viewed by other users (so long as your profile is public). Check out the full Steam Trading FAQ here.