Selkie is a standalone web application shell. With Selkie, you can use Web Applications as first-class citizens on your desktop. Selkie WebApps appear as full applications in your desktop. Entries of these web applications are added to the start menu, then can be found in KRunner on the KDE desktop, they appear as their own entry in the taskbar and window-switching machinery.
Selkie is built using WebKit and makes use of KDE's plugin system and Toolbar / Action system. Selkie can load and execute greasemonkey scripts as well, so there are literally hundreds of actions available.
Selkie has four main components. Selkie itself is the application that can run a number of web applications ("WebApps"). Those WebApps are plugins that can be loaded into Silk. The WebApp plugins contain meta information about the web application (icon, name, comment, plugin name). The plugins also contain information about the WebApp itself, such as at which page to start, or which URLs should be opened in the WebApp itself. This allows for sand-boxing the web application and opening external URLs in the default web browser.
Selkie is developed inside the Project Silk git repository on Gitorious.org. [Silk on Gitorious]
Not at all. It eats kittens and babies. Selkie is not feature-complete, nor widely tested either, it is in a proof-of-concept stage. The code is currently in a "proof-of-concept" stage, but not feature-complete. You can already create WebApps and actions for them, filtering based on URLs and wildcards has been implemented.
Creating WebApps by adapting the .desktop files by hand is possible, an editor for WebApps is in its very early beginnings.