In practice
An inside bar marks a period in which the market did less than the period before it: a small contraction. Traders mark the high and low of the larger candle before it, often called the mother bar, and watch which side breaks.
In a trend, an inside bar after an impulse often resolves in the trend's direction, which gives a tight, clearly defined entry and stop.
What to watch for
The first break of an inside bar frequently fails and reverses through the other side. On low timeframes inside bars are so common that they carry little information without a level or a trend behind them.