Polybius Square is a substitution cipher, also known as monoalphabetical cipher. This kind of ciphers are named like that because they proceed by substitute the input letters by always the same values during all the encryption process - unlike the polyalphabetical ciphers (such as Vigenere cipher for instance). Polybius square took its name from its creator, Polybius (greek historian who lived around 200 to 125 BC). The principle is actually really simple.
First, we fill a 25's boxes grid (5 by 5). There's also a 36 boxes variant which allow the user to encrypt numbers too. As you see, there's only 25 boxes in the grid, which mean that we will need to exclude one letter. This letter actually depends on which language is used to encrypt or decrypt the input. For instance in french we take out the "W" letter. In english it's the "J" or "I" that is being excluded. Here I take the "J" out. We fill the grid starting at the top left corner, ending at the bottom right. Then, we just have to replace the input's letters by the two numbers in the grid that represent its coordinates. For instance, the "A" letter will be the first in the grid, into the first line and first column. "A" will so be represented by "11" in the cipher. "B" will be replaced by "12" because it is on the first line but second column, and so on.
It's also possible to add a secret key when you encrypt the data, so it will improve the cipher security (even though it's now very unreliable to encrypt data with such a cipher). This key will be placed at the beginning of the grid, then the rest of the grid will be filled with the other letters that wasn't used into the key, in alphabetical order.
This substitution cipher was first created to improve "long distance" transmission techniques. The numeric codes composing this cipher was so translated using torches, which wasn't easy because you needed ten torches to transmit messages. Moreover, this cipher allow people to communicate by knocking on any surface (like morse code). According to the "legend", Polybius square cipher would have been used by russian nihilists jailed into the Tsar cells to communicate. The problem was that Cyrillic alphabet contained often more than 30 letters (depending on which alphabet we're talking about). American soldiers also would have used it into prisons.
The decryption process of Polybius Square, as all the others monoalphabetic ciphers, is really simple. You just need to make a statistic analysis of letters frequencies into the encrypted text (or numbers here). Since we know the average frequencies of letters occurrence into a large number of languages. Then you just have to find the correspondence basing on the occurrence rate of the encrypted text.