SDLXLIFF is the bilingual file format of Trados Studio: an XLIFF 1.2 file with Trados-specific extensions, in which each source segment is stored with its translation, its confirmation status and its match information.
When you add a Word, InDesign or other file to a Trados project, Trados converts it into an SDLXLIFF, so manual.docx becomes manual.docx.sdlxliff. The translation happens in that file.
RWS describes SDLXLIFF as XLIFF 1.2 that uses custom extensions allowed by the XLIFF specification, as memoQ's MQXLIFF and Phrase's MXLIFF also do. Each paragraph is split into segments marked inside the file, and an sdl:seg-defs element stores data that plain XLIFF has no standard place for, such as:
A tool that doesn't understand these extensions should keep them and work only with the text, which is why SDLXLIFF files usually survive a trip through another CAT tool. Turning the file back into a translated Word or InDesign document is still done in Trados.
SDLXLIFF files usually reach freelancers inside a Trados project package. See how to open an SDLPPX without Trados.
An agency sends you brochure.idml.sdlxliff because you don't use Trados. You translate it in memoQ and, before delivering, run a QA check that finds a missing tag and a number typed as 1.500 instead of 1,500. You fix both and send the file back. The agency puts it into the target-language folder of their Trados project and generates the translated InDesign brochure.
TraduQ's free tools read SDLXLIFF in the browser, without uploading it: the QA checker, the converter to review a file as an Excel sheet, the TMX editor, which builds a TMX from its segments, and the word count and quote tool.