The Online Family answers:

A so-called nanny cam is basically a webcam that a parent sets up to secretly watch how a nanny or babysitter treats the children while the parent is away. Nanny cams can also enable parents to monitor their kids from a remote computer, cell phone or even a handheld PDA -- with or without a nanny present.  Some daycare facilities even offer password-protected webcam broadcasts as a service so working parents can see what their babies are doing throughout the day. Nanny cams give some parents peace of mind, but when they're hidden, they can also cause conflict if caregivers feel spied on.