Source:
http://en.wikipedia.org/wiki/File:Louvet_Drehleier.JPG
The hurdy-gurdy is a violin-type instrument. Its bow, which is a rosined wheel, is driven mechanically by turning a crank that rotates the wheel, which rubs against the strings. The hurdy-gurdy has a soundbox to amplify the loudness of the strings.
Instead of fingers pressing down on the strings, a series of tangents (small wedges, typically made of wood) press on the strings to shorten their pitches. The instruments typically have some drone strings, which continuously vibrate on the same pitch as background sound, and fairly similar to the sound texture of the bagpipe.
Source:
http://en.wikipedia.org/wiki/File:Louvet_Drehleier.JPG
The history of the hurdy-gurdy is somewhat unclear, but references to what could be such an instrument go as far back as around 1000CE. It may originally have been called the organistrum, which dates back even further.
http://www.midcoast.com/~beechhil/vielle/sounds.html
http://www.youtube.com/watch?v=FfxHrEAQ7gs&feature=related