There are actually two answers.
The term Sandbox is used in both SEO and IT security.
They actually refer to totally different things.
Sandboxing an application with regards to IT security is explained here.
http://darksat.x47.net/topic/53.0.html <-- This is handy for protecting any application.
The Sandbox with regards to SEO is a term that people use to explain why new sites have trouble ranking.
The sandbox is just something that occurs because of specific google filters and algo code.
its more of a dampener than a true sandbox.
The Temporal link analasis gives you an idea of how it works.
http://darksat.x47.net/topic/83.0.html
