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First, what is it? Social media monitoring software is a class of applications delivered online that track aspects of how you and your company are being talked about on the web.
There are applications that track text - Twitter feeds, blog posts, comments and the like. These have been around for a while, and a classic example is what might still be called a "vanity search" on Google and other search engines. The basic idea is that the search engine looks for fragments like "Beagle Research" or "Pombriant" and brings links back to your email. If you recall the Steve Martin classic movie, "The Jerk", getting a Google Alert is equivalent to receiving a new phone book.