You use gold to bid for items, and at the end of the raid the gold is redistributed to the people who performed well in the raid.
It solves two problems.
One) It gives people who don’t need items from old raids a reason to run those raids, because they earn gold for completing it
Two) It removes the RNG from the loot system allowing participants to decide what items they value most heavily.
It started in Asia during TBC and became very popular beginning around ICC in WOTLK since it’s the only form of raiding where you are guaranteed to profit from running the instance - unless you’re bad and can’t meet the cutoff for getting paid out.