From The Aquarium Wiki
What is it
A CO2 Reactor (often called a In-line Reactor or Counter-flow Reactor) is a device that mixes CO2 gas with water from the return of a external aquarium filter.
There are many types of CO2 Reactors to be found. There are commercial and DIY designs available.
How does it work
Most follow the common design of a vertically mounted tube filled with irregular objects. At the top is an inlet valve which allows the outflow from a filter or pump to be forced down into the tube and out back into the aquarium.
However at the bottom of the tube you add a CO2 inlet. The CO2 tries to rise and is forced back over the irregular objects which break up the bubbles. In this manner the CO2 gas is in contact with the water for a much longer time than simply placing the CO2 outlet into an airstone or ladder in the aquarium. Therefore little gas is wasted.