Rack Extensions are the Propellerheads' own plugin format like the VST's are for Steinberg.
On March 20, 2012, Propellerhead announced the planned release for Reason 6.5 in 2012 Q2 to coincide with the release of Rack Extensions (which allow the use of 3rd party designed instruments and effect modules inside of Reason).
For a long long time, Reason was relied only on their built in effects and instruments only, but it all changed when the Propellerheads introduced their own plugin format for to the 3rd party developers to be able to code and develope more devices. Part of the beauty was that the Propellerheads' SDK allowed the devs to add CV (control voltage) functions to their devices as well, so all the REs were also capable to be in a big modular enviroment, just like the Reason stock devices.
By the now, there's hundreds and hunders of 3rd party tools, instruments and effects released for us to be able to buy or download for free.
We can TRIAL any RE for 30 days, so we don't have to rely on the marketing mumbo-jumbo only.
This is also great from of the developer's part, as it's not possible to pirate or crack the Rack Extensions.
The Reason Studios Rack Extensions
Here's an official video about the Rack Extensions::
google.com, pub-0445311970748285, DIRECT, f08c47fec0942fa0