When people hear the term insider trading they usually think of something bad. There are actually two types of insider trading one is legal and one is not.
It is perfectly legal for company employees, who file paperwork with the Securities and Exchange Commission, to buy and sell shares of their own company. Many investors will look at the buying and selling of corporate insiders when they trade stocks for a particular company.
However, it becomes illegal when company insiders buy or sell stock based on information not known to the public. An example might be a company insider buying huge amounts of stock right before the release of a new product that is expected to do very well. It is even illegal for a company insider to tell a friend or a neighbor to buy or sell stock based on inside information not known to the public.
The truth of the matter is that insider trading both legal and illegal happens everyday. It is no secret that the big players on Wall Street receive information all the time that is not known to the public.