A side chain yes. Found the introduction post which will do far better at explaining things than I.

https://steemit.com/steemengine/@aggroed/introducing-steem-engine-com

Things may have evolved slightly since then, and there are a ton of tokens now.

With the long-awaited Smart Media Tokens coming soon (2+ years 'soon'), it's going to be interesting to see how these Steem-Engine tokens fair. I think that some will likely migrate over, and that there will be no need (thinking the Steem Monsters related tokens) for some.