SIP is systematic investment planning.
In simple terms our savings should grow well, one of the tools to make it grow is investing in mutual funds. Mutual funds are nothing but a group of shares whose performance is assessed, mointored and changed by a manager. It is good for people who don't have the idea of dealing with individual shares where the risks and rewards can be high. In mutual funds the raise and fall can be spread out when compared to individual stocks.
There is no real minimum amount but most funds start at 500 or 1000 rupees. You can decide on the amount and the date every month based on the funds and your risk appetite and start it. You can do it online, via your bank or a investment house or agent. Most often there are no charges but the company gets a commission from the Mutual fund house itself.
Next why SIP. To make our money grow it's ideal to invest when the market is down and then hope that it rises up quickly. In real life, it is very difficult to time the market, hence if you buy a mutual fund in SIP mode, say every month, then the law of averages mean that you would be closer to the average price. This over a longer period 5-10 years spreads out your risk of not having to time the market and also helps the money to grow.
Mutual funds are good for some who wants to save money for the future,get returns better that a fixed deposit but does not want to take too much of risk. Many experts urge us to start as early as possible (age at investment), so that you can have good returns. Lastly it is very important to realize that Mutual funds are also exposed to risk. Say we have invested for our retirement and to our ill-luck if the world is going through a major crisis or the stock market crashes, then we would not get all our money back at that time. We would have to wait for the markets to stabilize, recover and then encash our mutual funds.
If our knowledge of mutual funds is very less, then it would be better to discuss with a financial planner or advisor