Insider trading is the practice of buying or selling equity in the company (stock trades, in other words) based on not-publicly-known information. Often times there are rumors of company acquisitions by larger companies, or mergers between companies, and this tends to drive up prices. The reason for that is that the acquiring company wants to purchase as many voting shares of the target company in order to assure that if there’s a vote about whether to agree to the takeover they’ll have enough votes to assure passage. And in order to acquire those shares, they’ll pay a premium on top of the market price. As the news starts to leak out that Company “X” may be taking over Company “Y”, the shares of Company “Y” rise on the expectation of a premium to be paid on those shares.
By the time you see those rumors published in the Wall Street Journal or other business periodicals (or on television), it’s “old news” and public. However, the discussions that precede those rumors can go on for months before the news hits the street as rumor or fact. Management insiders who attempt very strenuously to keep the talks secret (because they don’t want to drive up prices of the target company ahead of time and make their buy even more expensive) have a good sense of whether they’ll be successful or not. So an “insider” will sometimes buy (or have family or friends buy) stock in one or both companies in excess of what they might normally buy, based on the near-certainty of a large enough increase in price to make the risk pay off big in the short term.
Industrial espionage is the practice of one company paying a nominal employee of a rival company for trade secrets, recipes, prototypes, business processes or simple sabotage of plant and equipment.
“Taking and then selling something you don’t own” is garden-variety theft.
As it applies to Congress, I believe that “insider trading” is probably not very well named. Since Congress makes the rules that can affect entire industries, such as defense and healthcare, to name a couple that are frequently in the news, and their discussions are also not always as public as they ought to be, Representatives, Senators and their aides and families are also privy to some of the pending legislation that can make or break companies in the industry, and they may buy or sell stock in those industries based on the information. So even though Members of Congress are not “insiders”, per se, their ability to affect industry and business makes them similar to business insiders.