A live-in nanny is exactly what it sounds like: a child care provider who lives in your house. This individual provides care for your child or children during agreed upon hours. In return, you provide a place to live and a salary that is less than you'd pay a nanny who doesn't live in your home.
The upside of a live-in nanny is certainly cost and convenience. You'll pay less, but enjoy the benefits of one-on-one nanny care for your child or children. You'll also be able to go out for date night more easily, as long as your nanny is available in the evenings.
The downside involves privacy, naturally. A live-in nanny is privy to all your most personal foibles, and may overhear family arguments, er, discussions. You'll want to carefully screen the individual to make sure you can coexist happily. A live-in nanny works best when you have a large house, ideally with separate quarters for her to live, where you won't annoy each other.