From Carleton Moodle Docs
What are filters?
Filters allow for the automatic transformation of entered text into different, often more complex forms. For example the titles of resources can automatically become hyperlinks that take you to the relevant resource, URLs pointing to mp3 files can become Flash controls embedded in the web page that let you pause and rewind the audio. The possibilities are endless and there are a number of standard filters included with Moodle and many more specialized filters available from the Moodle.org Modules and plugins database.
See Filters for details.
Why is my filter not working?
After checking that the filter is enabled for the site, course and activity or resource, go to Site administration > Plugins > Filters > Manage filters and try moving the filter higher up the list. See the forum discussion Moodle Media player not appearing for an example.
How do I disable a filter?
To disable filters on a particular activity, open the activity and then go to the Filters link in the Activity Administration area of the Administration block. To disable a filter for an entire course, start from the main course page and go to the Filters link in the Course Administration area of the Administration block.
Where do I find additional filters?
You will find a number of contributed filters in the Moodle Plugins directory.
How do I create custom filters?
See the following for details: