Steem (blockchain) issues new STEEM tokens each time a new block is produced. A majority of these new tokens are then allocated to a reward pool to reward users for posting and voting on content.
Starting from December 2016, Steem blockchain began creating new tokens at an inflation rate of 9.5% per year. This rate is planned to decrease for about 0.5% per year until reaching 0.95% in about 20.5 years.
On Steem blockchain, STEEM can be converted ("powered up") into STEEM Power, traded for Steem Dollars, or transferred to other accounts. On cryptocurrency exchanges STEEM can be traded for other tokens like bitcoin.
The price of STEEM token is determined by the cryptocurrency market depending on token supply and demand on cryptocurrency exchanges similar to how the price of a commodity like gold is determined.