There are some different versions, but mainly the idea is, that some of the price money is rewarded for knocking other players out rather than finishing in the top. In the first original format the bounty was a fixed amount like 25% of the buyin excluding rake. On PokerStars this now only exist in the SnG lobby, as far as I know. There are 9 man KO SnGs with various buyins and a 1,5$ 90 man as well.
The next evolution was the progressive knockout or PKO, where you only collect half the players bounty, and the other half is added to your own bounty. These are now the most common on PokerStars, and they have many different names including Bounty Builder. The idea behind the PKO is to make the bounty still matter towards the end of an MTT, which they tend to not do in the KO format. If for instance the bounty is 30c, but the next payjump is 3$, then the bounty is basically irrelevant.
Regardless of format its important to make some adjustments when playing bounty tournaments, and the most important is to get involved more liberally, when you can win a bounty. Some players take this way to far, but played correctly there are situations in bounty tournaments, where you have to call with some pretty bad
hands basically hoping to suck out on people, so you can win their bounty.