SIMPLE plans are funded by employer contributions, but they can also be funded by employee salary deferrals. Similar to other retirement plans and accounts, earnings grow income tax free until funds are withdrawn, which is usually at retirement. At that time, the amounts withdrawn are taxed as ordinary income.
The advantages of SIMPLE plans are the avoidance of costly administration and cumbersome testing. The disadvantage is the required ongoing contribution of either a flat 2% or 3% match (with some exceptions). Also, employer contributions are vested 100% immediately.