Family Sharing allows a user to authorize up to 10 devices and five accounts to access any of the games in his or her Steam account. Users need to be online in order to play a shared game and have access to the entire library of a user sharing games, with some exceptions -- games that use CD keys or third-party services like Origin or Uplay may not be supported. DLC can be played right alongside the base game, but only if that game is not owned by the guest. In other words, you can't borrow DLC for a game you own through Family Sharing.
In order to use Family Sharing, which had been in beta since September, users have to enable the Steam Guard security feature and specifically authorize each device games will be played on.
Valve encourages users to be cautious about whom they share their library with, as guests who use a shared library to cheat or commit fraud may have the library owner's sharing privileges revoked and account VAC banned.