I'm also referring to peat pellets. A peat pellet is peat that is compressed into a small disk. When the disk is watered it expands into a cylinder that is ready for seeds. There is no need to add potting soil as the peat acts as the growing medium. Like the pots, the entire thing can be planted in the ground.
Peat is harvested from these bogs and swamps for many uses worldwide. As an agricultural product, peat has the important ability to retain soil moisture and as a amendment helps improve soil structure (see my blog "The Dirt on Soil"). It can hold nutrients, though it doesn't offer plants any of its own. As a short-term growing medium, it provides seeds with relatively consistent moisture and some nutrients.
When you buy and use peat pots you're using a product that was shredded, cleaned, ground, and pressed by the pot manufacturer. The primary reason is to offer you a simple way to start seeds.
They are easy and becoming more so. Almost every store I visit (grocery, home improvement, or retail) offers complete growing kits available for home gardeners. They include a plastic tray to hold peat pellets, the pellets, and a cover to hold in moist air. If you don't have one of these kits and you plan to start seeds indoors, I suggest buying one. Though the peat pellets are intended for one-time use, the plastic base and cover are reusable. I still have a plastic kit I purchased years ago; that's what I put my newspaper pots in.
Because the intent is to plant the pot and seedling together, you want to choose a pot/pellet that will be big enough to handle the new plant's growth. You can sow a seed, let it grow in a small pellet, and then transplant it to a larger pot, before ultimately planting it in the garden, but why not save a step and start with a larger pot in the first place. For that reason the smaller pellets are best suited for small plants or for seeds that will only spend a few weeks inside before being placed in the garden.
When you do place the pot and plant in the soil be sure that the entire pot is in the soil. Any part of the peat pot that is exposed to the air will dry out. Because of its water absorbing ability, it then acts as a wick, drawing moisture from the soil into the dried peat section. The soil around it will dry out faster and plants will be deprived of water. That's not a good thing.
When using peat pots, I usually tear off the top inch or so of the pot before planting. That ensures the pot is entirely in the soil and won't act as a wick. Peat pellets don't pose the same problem, but I make sure the entire pellet is below the soil surface.
Peat pots offer definite advantages. If you use peat pellets you can avoid the mess of dealing with potting soil. Because the peat is partially decomposed to start with, it will continue to decompose in the soil after planting. In the soil, roots are able to grow through the walls of the peat pot and pellets. By placing the entire pot/pellet in the ground you won't expose plants to the root shock that usually happens when you transplant them from plastic or terra cotta pots.
There are a few limitations. Because the pellets are entirely peat and because peat doesn't offer a lot of fertility, seeds may not grow as fast or as big as in good potting soil. Though the pots are designed to decompose, in a dry area of your garden it may take awhile; I've tilled up pieces of peat pots from the previous season or earlier. Decomposition requires nitrogen and as the pots/pellets decompose they can rob nitrogen from your plants. Be ready to use a high nitrogen fertilizer after you put them in your garden.
You can find peat pots in a number of sizes. You can find similar products made from cow manure and some zoos sell pots made from exotic animal manure. You'll also find fiber pots made from variable plant fibers; bigger pots tend to be fiber and they have the basic properties of peat pots though I think they take longer to decompose.
If you haven't tried peat as a starter, give it a try. It's definitely easy. You may find some of the limitations a problem and will need to balance that against the time saved at planting. For a large quantity of seeds, having 36 or 70 pellets in a single tray makes the task a breeze. It's something to consider.