Social democracy is an ideology of the political Left that emerged from socialism in the earlier part of the twentieth century. Unlike its cousin Communism, which seeks to destroy capitalism by (violent) revolution and replace it with a different social and economic system, social democracy seeks to regulate capitalism and gives the government a role intervening in order to remedy its alleged deficiencies.
It is generally considered that the international Left split into two distinct camps after the Russian Revolution of 1917. Members of the more extreme factions around the world, which sought to achieve radical societal change through revolution, became known as communists, while members of the less extreme factions, which sought to pursue gradual change through the democratic system, became known as social democrats. The roots of these divisions, in fact, long preceded 1917: Marxists, for example, had called for violent revolution in the nineteenth century, while more moderate parties such as the British Labour Party had never espoused such ideas. Austrian economist Friedrich Hayek writing in 1945 observed, "To many who have watched the transition from socialism to fascism at close quarters the connection between the two systems has become increasingly obvious, but in the democracies the majority of people still believe that socialism and freedom can be combined. They do not realize that democratic socialism, the great utopia of the last few generations, is not only unachievable, but that to strive for it produces something utterly different – the very destruction of freedom itself. 
Social Democracy in Practice
The economic policies of many European countries have been influenced by social democratic principles (the most notable being Denmark, Finland, Norway and Sweden). While such countries are often touted as having the highest living standards in the world, they also share very high tax rates and slower growth rates as compared to rest of the world (with the exception of Sweden). Germany has been ruled three times by the SPD. The policies of this party have increased the debt.
- Road to Serfdom, Friedrich A. Hayek, Reader's Digest Condensed Version, April 1945, pg. 36.